A Special Needs Trust, which is also sometimes called a Supplemental Needs Trust, is a specific type of irrevocable trust that benefits an individual with special needs but does not jeopardize the person’s ability to receive government assistance from programs like Medicaid and Supplemental Security Income (SSI) that have means-based eligibility requirements. To accomplish this goal, the SNT must be set up and administered in strict accordance with rules established by federal and state laws and regulations.
When properly established and administered, an SNT provides benefits for your child or grandchild without disqualifying the child from government assistance. The person who creates the trust — usually a parent, grandparent, or legal guardian — is the settlor or grantor of the Special Needs Trust. The child is the sole beneficiary. In the document that establishes the trust, the grantor designates a trustee to manage the trust and distribute the assets in accordance with the rules imposed by law and in the trust document itself.
All money and assets in an SNT must be used exclusively for the sole benefit of the beneficiary. However, funds cannot be given directly to the beneficiary without potentially affecting eligibility for government programs, because the distribution would be counted as income. Instead, the trustee uses the money to supplement the beneficiary’s government benefits by paying for things that government assistance does not cover.
Generally, trust proceeds cannot be distributed as cash or used for food, shelter, and basic clothing. However, through the trust, your child or grandchild benefits from receiving additional care and amenities that they otherwise would not have. Examples of allowable expenditures from an SNT typically include:
- Medical and dental expenses
- Caregiver and personal care services
- Physical therapy
- A vehicle or other transportation
- Vacations and entertainment
- Furniture and appliances
- Personal items like computers, cameras, radios, and televisions
- Home improvement
- Sporting goods and fitness equipment
- Utilities such as internet, cable TV, and cell phone service
- Musical instruments and lessons
When you set up an SNT for your child or grandchild, you may specify what the trust proceeds cover, within the permissible legal guidelines. Your attorney tailors your trust document to fit your child’s or grandchild’s circumstances and your wishes for use of the trust funds.
Setting up a Special Needs Trust requires assistance from an experienced estate planning attorney. The legal requirements are complex. The trust document must comport in all regards with strict rules, in order to protect your child’s or grandchild’s ability to receive government assistance.
In addition, administration of the trust must conform to both the provisions of the document and the legal rules regarding distributions. The trustee has an ongoing responsibility to ensure that the trust operates as necessary without jeopardizing government benefits. For that reason, selection of the trustee for an SNT is extremely important.
Your attorney will discuss the importance of trustee designation as part of the preparation that goes into establishment of the trust. Before you make the final decision, you will have all the information necessary to appoint a responsible trustee to protect the trust assets and provide care, support, and amenities for your child or grandchild.
A trust document with improper terms or language can completely defeat the purpose of setting up a Special Needs Trust. You should rely on an attorney knowledgeable in the applicable laws and experienced in setting up SNTs to create a trust for your child or grandchild. You should never use printed forms or online services for any estate planning documents, including a Special Needs Trust.
Once created, an SNT is irrevocable. That means it cannot be changed, amended, terminated, or revised after it is established. If the trust document contains mistakes or errors, or it doesn’t comply with legal requirements, the damage may be irreversible. Consulting with an experienced Special Needs Trust attorney avoids those problems completely.
At the law firm of Barron, Rosenberg, Mayoras & Mayoras, P.C., we provide a full range of services relating to estate planning, including Special Needs Trusts. We’ve been serving clients in Oakland County and beyond for more than 40 years. Our clients count on our commitment, experience, and credentials when they turn to us for their legal needs.
Call us today at (248) 494-4577 or use our online form to talk with our experienced estate and probate attorneys.