Your Special Needs Trust (“SNT”) Defined

Your Special Needs Trust (“SNT”) Defined
You have a special needs trust— or you have been
designated as the trustee of a special needs trust— or your child has a special
needs trust. What is a trust? What is a trustee? What is a beneficiary? What
are all these terms you’ve never used before even though your first language is
English? This article provides you with an overview of the more common terms
found in your special needs trust.
What is a Trust? A trust is a legal arrangement in which a person or a
financial institution, called the trustee,
holds and manages assets for the beneficiary (see definition below). The trust
document explains the trustee’s authority, how the trust is to benefit the
beneficiary, and how and when the trust is to terminate. There are many types
of trusts, but this article is focusing on a specific type of trust—a special
needs trust.
needs trust (SNT)
 is a
trust that will preserve the beneficiary’s eligibility for needs-based
government benefits such as Medicaid and Supplemental Security Income (SSI).
Because the beneficiary does not own the assets in the trust, he or she can
remain eligible for benefit programs that have an asset limit. As a general
rule the trustee will supplement the beneficiary’s government benefits but not
replace them. Examples of supplemental needs are costs for sitters, companions,
and dental or medical expenses not covered by Medicare or Medicaid.
, also referred to as a “self-settled” or “(d)(4)(A)
trust,” is funded with assets or income that belong to an individual with
a disability (see definition below) and who is the beneficiary of the trust. In
order for the assets of this type of trust not to count for Medicaid or SSI
purposes, federal law requires that the beneficiary must be under the age of 65
when the trust is created and funded; the trust must be irrevocable and provide
that Medicaid will be reimbursed upon the beneficiary’s death or upon
termination of the trust, whichever occurs first; and the trust must be
administered for the sole benefit of the beneficiary. Typically the funding
comes from a personal injury settlement or inheritance the beneficiary receives
, frequently referred to as a supplemental needs trust, is funded
with assets belonging to a person other than the beneficiary. In fact, no funds
belonging to the beneficiary may be used to fund the trust. Typical funding
comes from gifts, an inheritance from parents or grandparents, and proceeds of
life insurance policies. This trust has no provisions to pay back Medicaid upon
the trust’s termination; rather, the person creating the trust decides how the
trust estate is distributed when the beneficiary dies.