Special Needs Planning

Special Needs Trusts
A Special Needs Trust (“SNT”) refers to a trust set up for a disabled beneficiary which will avoid a period of ineligibility for certain government benefits such as SSI and Medicaid and will also avoid the treatment of the trust as a resource for SSI or Medicaid eligibility purposes. There are two types of SNTs: the Third-Party SNT and the Self-Settled SNT.

Third Party SNT
A Third Party SNT is a trust set up and funded by someone other than the disabled beneficiary. In most cases, a parent or relative will set up a third party SNT as part of their estate plan. This third party SNT allows parents and grandparents to bequeath part or all of their estate to the disabled beneficiary while preserving the beneficiary’s public benefits. This third party SNT can be included as part of a will or a trust agreement. At the beneficiary’s death, the property bequeathed can pass as designated in the will or trust agreement. A word of caution; however: the trust must be written to clearly state the grantor’s intent that distributions are to be made solely in the discretion of the trustee and that the trustee is under no obligation to provide for the beneficiary’s support or distribute funds directly to the beneficiary.

Self-Settled Trusts
There are two types of SNTs that allow the disabled individual to retain his or her resources in an SNT without those resources disqualifying hi from SSI or Medicaid benefits.

d(4)(A) SNT
This is a trust created for the sole benefit of an individual with a disability under the age of 65 by the individual’s parent, grandparent, legal guardian, or court. The beneficiary must be disabled as defined by the federal SSI program. The trust must provide that any remainder left in the trust upon the individual’s death will be paid back to the state.

d(4)(C) “Pooled” SNT
This is a trust created and managed by a not for profit organization, such as Commonwealth Community Trust or Personal Support Trusts (both operate in Virginia). A separate account is maintained for each beneficiary of the trust; however, the assets are pooled together for investment purposes. This type of trust can be created by the individual’s parent, grandparent, legal guardian, court, or the individual himself. As with the d(4)(A) SNT, the trust must provide that any remainder left in the trust upon the individual’s death will be paid back to the state.

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