Special Needs Trusts
If you have family or friends who are on public benefits, you may be familiar with special needs trusts ("SNT"). However, many people do not have a sound understanding of these particular types of trusts. Let me begin an explanation by stating that the goal of SNTs is to preserve entitlement to need-based public benefits while utilizing additional monies to provide for items not covered by public benefits. Need-based public benefits include Social Security and Medicaid.
The best way of explaining a SNT is by describing how they are used. Typically, SNTs are used for current recipients of need-based public benefits, or for those who potentially may receive such benefits in the future, as a way to supplement their care and lifestyle. Trustees of SNTs can provide trust monies to pay for those items that the government is not paying for in its providing of public benefits. In other words, an SNT trustee may pay for health care and medical procedures not provided by the governmental benefits, and they can also pay for items to enhance the recipient's lifestyle while still maintaining the recipient's eligibility for public benefits. Such enhancements could come in the form of the payment of educational, entertainment, and travel expenses.
There are some solid advantages that can come through the correct administration of a special needs trust. The most important advantage is that the assets of the individual either seeking or receiving governmental benefits may not be deemed countable if placed into the SNT, thus allowing eligibility. Other advantages include the flexibility that a recipient has for extra care, the avoidance of a costly guardianship, and a protection of assets from the recipient's creditors and at times, from mismanagement.
Of course, there are many things to consider in deciding to utilize SNTs. For instance, some SNTs have payback provisions. In other words, some SNTs require that the government be repaid upon the death of the recipient of governmental benefits, for monies it paid out for the recipient during his or her lifetime. In addition, there are, by necessity, restrictions as to the use and availability of assets in a SNT. Moreover, only a person of great trust should be appointed as the trustee of the SNT and the trustee can not be the benefit recipient. Administrative costs of operating a SNT are also a factor.
As I'm sure you can imagine, SNT law is a very unique, dynamic, and specialized area of law. For an individual on public benefits, there is no greater risk than the potential loss of vital governmental benefits. Please keep in mind, as well, that people who may receive public benefits in the future, whether due to expensive care costs or outliving their assets, or people who have become disabled in an accident and are awaiting a future settlement award, should seriously examine whether a SNT may be needed.
If you or someone you know is uncertain as to whether a SNT is appropriate or whether a transfer of assets involving a SNT may potentially lose benefits for a recipient, I strongly recommend that you make an appointment with a knowledgeable attorney in SNT law to provide assistance prior to taking any action.