From the Sections, 0421 WYBJ, Vol. 44 No. 2 16

AuthorKelly S. Davis Past Chair Estate Planning, Elder Law, Trust & Probate Section
PositionVol. 44 2 Pg. 16

From the Sections

No. Vol. 44 No. 2 Pg. 16

Wyoming Bar Journal

April, 2021

Tracking Down the Mysterious Special Needs Trust Form

Kelly S. Davis Past Chair Estate Planning, Elder Law, Trust & Probate Section

In the responses to the recent Estate Planning, Elder Law, Trust & Probate Section’s member survey, one sees several requests for information regarding the Special Needs Trust (SNT) and associated forms. Tis is not surprising. As elder law attorneys, we are often asked for a copy of our “SNT form.” It is like asking a personal injury attorney for his form that allows him to win million-dollar judgments. The problem in either case is that there are no one-size-fits-all magic forms that will guarantee the desired outcome every time. It is all about the attorney applying his knowledge to a factual situation to obtain the desired goal. If properly done, the SNT is a godsend to a disabled person.

First, we need to understand what an SNT is and how it is used. When a disabled person is eligible for means-tested public benefit programs like Supplemental Security Income (SSI) or Medicaid, settlements, awards, inheritances, gifts, child support, alimony, and even lottery winnings can be sheltered with a properly drafted and administered SNT. Since the beneficiary does not exercise control over the trust estate, it preserves their eligibility for means-tested benefits while allowing the trustee to expend assets and income to improve the beneficiary’s quality of life.

There are different types of SNTs depending on how they are structured and established—first-party stand-alone, first-party pooled, third-party stand-alone, and third-party pooled special or supplemental needs trusts. As the names imply, “stand-alone” trusts are separate instruments written for a specific individual beneficiary, while “pooled” trusts are written for an unlimited number of beneficiaries under which the trustee manages his individual accounts. “First-party” SNTs are funded with the beneficiary’s assets, while “third-party” SNTs can only be funded with assets belonging to persons other than the beneficiary, such as parents or grandparents. All first-party SNTs are creatures of statute; they must be irrevocable and provide for a pay-back to Medicaid upon the beneficiary’s death.[1] They must be established before the beneficiary’s 65th birth-day.[2] A third-party SNT, on the other hand, cannot hold any of the beneficiary’s assets, so there are no pay-back requirements or age limitations and they do not need to be irrevocable.

Before determining which SNT vehicle to use, there are certain questions the attorney must ask.

Whose assets will fund the trust?

If any of the beneficiary’s assets are used, even if it is just $1, the trust is considered to be of the first-party variety.

How old is the beneficiary?

If using a first-party SNT is indicated, the beneficiary can be no older than 64 at the time it is established and funded.

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