From the Sections, 0421 WYBJ, Vol. 44 No. 2 16
| Author | Kelly S. Davis Past Chair Estate Planning, Elder Law, Trust & Probate Section |
| Position | Vol. 44 2 Pg. 16 |
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.
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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