Sometimes referred to as a supplemental needs trust, a Special Needs Trusts (SNT) may be created to benefit a family member or close friend who has a disability. The trust is set up for a person with special needs to supplement any benefits the person with special needs may receive from government programs. Any funds in a SNT will not be counted for purposes of qualifying and maintaining eligibility for certain governmental benefits programs. Governmental programs that require the protection of a special needs trust such as Supplemental Security Income, Medicaid, and Veterans Benefits, are needs-based programs and the person who you want to provide for may be disqualified from these programs if the person held the assets or funds directly.
Programs like SSI and Medicaid only meet basic needs such as food and housing. The SNT can give the means to provide the disabled person with an enhanced quality of life. The trust pays for supplemental and extra care over and above what the government will pay. The trust funds are disbursed to third parties who provide goods and services for use and enjoyment by the disabled person. The person who manages the trust assets, called the trustee, is able to purchase things like a phone, a computer and electronics, a television, a vehicle, cable and internet services, clothing, tuition, books, travel, entertainment, household furnishings and furniture, special accommodations for housing, and other items that allow the beneficiary a richer life.
If the trust is funded during the lifetime of the person who established the trust, it is effective immediately, and other family members, including grandparents, aunts, uncles, brothers, sisters, or friends can give money to the trust either by writing a check or by naming the trust as a beneficiary in their will. A parent of a disabled child may also choose to purchase a life insurance policy payable to the trust.
The person making the trust may attach an optional letter of intent, which is a letter expressing their wishes on how the funds should be used, along with special notes about the disabled person’s preferences.
The trust is beneficial to families and friends of disabled people receiving government benefits who want to enhance that person’s quality of life. Even if a disabled person is not currently receiving government benefits, the trust protects public benefit eligibility in the future or offers a way to assist in managing the assets of a special needs person.
Written by Heather W. Winter, Esquire