Special Needs Trust: The Basics

Establishing a Special Needs Trust (SNT) can provide peace of mind for the families of disabled children and adults in addition to preserving eligibility for public benefits.   So, what are the requirements for creating an SNT and is this a complicated process?

There are some basic requirements for every SNT.

A special needs trust document must be created. Another requirement is that the trustee distributions must be discretionary, meaning that the trustee (the person handling the money) has the ability to decide how special needs trust funds are used—following the terms outlined in the trust.

In addition, the beneficiary (the disabled person) cannot be entitled to receive income or principal from the SNT. This means that the Trustee cannot give trust money to the disabled person directly, but rather the Trustee will use the funds to pay for the needs of the disabled person.

The disabled person, as the beneficiary of the SNT, must be under the age of 65 when the trust is established.

For those who are disabled and over 65 that inherit or receive money from a settlement, a special needs trust will not be an option. However, there is almost always something that can be done to preserve excess assets and protect eligibility for public benefits programs. If this is you, give us a call at 404-843-0121 today to discuss asset protection. You can also learn about asset protection here.

There is more than one type of SNT—and they each have different requirements in addition to those we’ve already mentioned.

Some SNTs must include Medicaid “pay-back” provisions, while others allow leftover assets to be designated for other family members or charities. Also, some SNTs must be for the “sole benefit” of the disabled person. Finally, some trusts are required to be irrevocable meaning they cannot be changed after they are put in place while others can be revocable, which allows for more flexibility if circumstances or needs change.

Take Kevin for example, he has Down’s syndrome and has always lived with his parents. Kevin’s parents want to ensure that he is “set for life,” when something happens to them. Kevin’s parents are comfortable financially, but they are worried to leave assets to Kevin outright because they don’t know how that would affect his ability to get public benefit programs, like Medicaid, later in life. Kevin’s parents sat down with our attorneys and determined that an SNT was the best way to leave an inheritance for Kevin and allow him to apply for benefits later if he needs them. The type of SNT they established for Kevin also allows for any money leftover at Kevin’s death to go to their other children.

While Kevin wasn’t able to set up his own trust, some special needs trusts allow the disabled person to be the grantor or trustmaker, as opposed to having a family member set up the trust for their benefit. If the disabled person has capacity to set up their own special needs trust, this may also a good time to evaluate their other estate planning needs.

For example, they may also need to get a financial power of attorney and a healthcare directive in place. These are crucial documents that allow someone you trust to make financial and medical decisions for you, if you can’t handle your own affairs. For more information about these important estate planning documents, click here.

An approval process is required prior to putting assets into the trust.

A draft of the SNT is submitted to the Trust Unit of the Georgia Department of Community Health. This will ensure that the trust meets all of the necessary requirements. Families can be assured their disabled loved one’s needs can be met while protecting their eligibility for public benefits.

As you can see, it is important to consult an attorney with experience in special needs trust planning to be sure that the right type of trust is established for your loved one and all of their other affairs are in order. Follow along with our deep dive into Special Needs Trusts with our blog and please join us for a FREE webinar, “Special Needs: Unique Challenges, Creative Solutions” on Wed. April 28 from12-1 PM to learn more. Register here.