What is a Special Needs Trust or Supplemental Needs Trust?
Simply put, anyone who has a disabled child or family member can benefit from the use of a supplemental needs trust.
A supplemental needs trust, sometimes also referred to as a special needs trust or an SNT, allows a family to provide additional assets to the disabled individual without endangering the benefits the disabled person receives through disability programs. Without proper arrangements, a disabled person can end up losing disability benefits when they receive assets.
Many families with disabled members make use of programs such as Supplemental Security Income, or SSI, and Medicaid. While those programs can be extremely helpful, they also come with strict income limits that have to be obeyed for the person to receive benefits.
This can make asset distribution very difficult for those families. For example, suppose you name your disabled granddaughter as a beneficiary of money in your will. While such a decision is intended to aid the her, the payout could cause her to exceed the maximum amount of monthly allowance for her monthly SSI payout. And that would mean the you would accidentally cause your disabled granddaughter to lose their SSI eligibility.
A Supplemental or Special Needs Trust is a Solution
Fortunately, supplemental needs trusts provide a solid solution to avoid such a dilemma. The SNT allows the creation of a trust for assets to be held without violating the income requirements of disability programs.
First party trusts allow you to pass a large estate or amount of money to a disabled person. This option typically gets employed when disabled individual suddenly finds themselves the unexpected beneficiary of an asset, allowing them to accept the intended asset on short notice.
Third-party trusts, on the other hand, function better when used for long-term planning. This type of trust functions like a savings account, allowing the creator of the trust to fill the trust as needed for future use.
While SNTs can be a vital tool to provide for disabled family members, certain rules and restrictions have to be observed for the participating parties. Consult a reputable and experienced estate planning attorney like James R. Nici of Naples, Florida to learn about this type of trust or trusts in general.
For instance, Florida law states that third-party SNTs must explicitly state the trust’s purpose, particularly how none of the assets or funds placed in the trust will pose a problem to disabled benefit eligibility. In other words, the SNT has to be written in a way that will not pose a threat to the individual’s benefits. You want to make sure the trust’s language spells that out clearly for everyone to see. Also, make sure none of the assets or funds in the SNT get used to cover any of the expenses addressed by Medicaid or the SSI programs. This may seem obvious, but accidentally using an SNT’s funds to temporarily cover those expenses can lead to a loss of program eligibility.
Want to know more about how SNTs operate in the state of Florida? Need to learn about the various types of trusts used in estate planning? Contact the Nici Law Firm today.