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What is a Special needs trust (SNT)?

January 27, 2017

Special Needs Trusts (SNTs)

 

 

Unfortunately, the use of SNTs is sometimes hard to understand.  A special needs trust (SNT) is usually established for an individual that has a mental or physical disability that will not allow for him/her to engage in any gainful activity by reason of medical or physical impairment that will lead to death or which has lasted or will be expected to last at least 12 months (42 USC section 1382C(a)3(A).  The main purpose of establishing an SNT is to maintain SSI benefits.  If you receive SSI, you will more than likely also get Medi-Cal for your health care needs.  These are major benefits that people with mental or physical impairments need.  By establishing an SNT the beneficiary will still receive SSI benefits, and the special needs trust can be the beneficiary for any assets that the parents leave for the beneficiary. 

 

There are two types of SNTs that can be created, a third party SNT and a first party SNT.  It is recommended that a third party SNT be created.  This is a trust created by the parents of the child, and the beneficiary is the SNT rather than the individual.  This ensures that the child will continue to get SSI benefits, and Medi-Cal.  The parents’ assets can be used for a variety of different things like vacations, classes, hobbies, transportation, professional services, furniture, pet supplies, etc.  Essentially, almost anything that is NOT an outright cash gift that will help the recipient live a better quality life.  The beneficiary will never own the property in the trust, and will not have direct access to the trust funds.  The assets left to SNT usually consist of money and property and the trustee of the SNT will use the assets for the benefit of the impaired child.  The trust is usually terminated when either the assets run out or the child passes away.  If there are still assets available in the SNT those assets are passed on to someone else.  The above description describes a third party SNT.  There are also first party SNTs but they are not recommended.  They have very particular rules, and must adhere to those rules strictly.  They also require a pay-back provision in the trust that will pay back the government for services rendered.  For more information on SNTs generally, and especially third party SNTs, please call us for a free legal consultation.

 

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