When creating or revising your estate plan, it’s important to take into account all of your loved
ones. Because each family has its own unique set of circumstances, there are a variety of trusts and
other vehicles available to specifically address most families’ estate planning objectives.

Special needs trusts (SNTs), also called “supplemental needs trusts,” benefit children or other
family members with disabilities that require extended-term care or that prevent them from being
able to support themselves. This trust type can provide peace of mind that your loved one’s quality
of life will be enhanced without disqualifying him or her for Medicaid or Supplemental Security
Income (SSI) benefits.

Preserve government benefits
An SNT may preserve your loved one’s access to government benefits that cover health care and
other basic needs. Medicaid and SSI pay for basic medical care, food, clothing and shelter.
However, to qualify for these benefits, a person’s resources must be limited to no more than
$2,000 in “countable assets.” Important note: If your family member with special needs owns more
than $2,000 in countable assets, thus making him or her ineligible for government assistance, an
SNT is useless.

Generally, every asset is countable with a few exceptions. The exceptions include a principal
residence, regardless of value (but if the recipient is in a nursing home or similar facility, he or she
must intend and be expected to return to the home); a car; a small amount of life insurance; burial
plots or prepaid burial contracts; and furniture, clothing, jewelry and certain other personal
belongings.
An SNT is an irrevocable trust designed to supplement, rather than replace, government assistance.
To preserve eligibility for government benefits, the beneficiary can’t have access to the funds, and
the trust must be prohibited from providing for the beneficiary’s “support.” That means it can’t be
used to pay for medical care, food, clothing, shelter or anything else covered by Medicaid or SSI.

Pay for supplemental expenses
With those limitations in mind, an SNT can be used to pay for virtually anything government
benefits don’t cover, such as unreimbursed medical expenses, education and training,
transportation (including wheelchair-accessible vehicles), insurance, computers, and modifications
to the beneficiary’s home. It can also pay for “quality-of-life” needs, such as travel, entertainment,
recreation and hobbies.

Keep in mind that the trust must not pay any money directly to the beneficiary. Rather, the funds
should be distributed directly — on behalf of the beneficiary — to the third parties that provide
goods and services to him or her.

Consider the trust’s language
To ensure that an SNT doesn’t disqualify the beneficiary from government benefits, it should
prohibit distributions directly to the beneficiary and prohibit the trustee from paying for any
support items covered by Medicaid or SSI. Some SNTs specify the types of supplemental expenses
the trust should pay; others give the trustee sole discretion over nonsupport items.
Alert family and friends
After creating or revising your estate plan, discuss your intentions with your family. This is
especially important if your plan includes an SNT. To ensure an SNT’s terms aren’t broken, family
members and friends who want to make gifts or donations must do so directly to the trust and not
to the loved one with special needs. Contact us with any questions regarding an SNT.
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