A Guide to Supplemental Needs Trusts

Edited by Rory Clark

Supplemental Needs Trusts (SNTs) are a type of special needs trust. They are specially crafted to comply with American state and federal law. They are designed to provide benefits to and protect the assets of individuals.

Benefits of a Supplemental Needs Trusts

Supplemental Needs Trusts may be used to ensure that beneficiaries maintain government benefits such as Supplemental Security Income (SSI), Medicaid, and housing benefits, among others. When a special needs trust is in place, the trustee controls the management of the beneficiary’s assets, not the beneficiary. Therefore, those assets are not considered when determining the beneficiary’s eligibility for the government benefits. Even if the family members do not want to pursue government benefits, putting a special needs trust in place may still be beneficial.

What is a Third-Party Supplemental Needs Trust?

Whenever a client needs to plan for a loved one with special needs, we often guide this person to a Third-Party SNT. Generally, we work with the parents of an individual with disabilities or special needs to establish a Third-Party SNT. However, a grandparent, sibling, or another person (other than the beneficiary) may establish the SNT. 

Third-Party SNTs are designed to protect assets for disabled children, adults, or seniors while allowing them to receive SSI, SSDI, and Medicaid health insurance and long-term care benefits. Third-Party SNTs are often used to receive an inheritance or personal injury litigation proceeds on behalf of an individual with a disability to allow the person to qualify for government benefits despite their receipt of the settlement.

What is a First-Party Supplemental Needs Trust?

Whenever a client seeks to protect a person with a special need or disability who has already inherited money or property outright or has received a court settlement, we often recommend a First-Party SNT. 

This kind of trust can also be helpful when a person without a prior disability who owns assets in their name and later becomes disabled needs to qualify for public benefits that have an income or asset limitation. First-Party SNTs are always carefully crafted to comply with complicated federal law and rigorous state-specific regulations. First-party SNTs are commonly called self-settled SNTs, Medicaid payback trusts, and d4A or d4C trusts.

Who should I choose as a trustee?

Select a person you trust to control the trust’s administration and carry out your wishes. Some professional trustees can serve if you do not have a suitable friend or family member. The trustee plays a vital role in the management of an SNT. It is essential to select someone familiar with the potential impact of the trust assets’ distribution or the beneficiary’s eligibility for benefits. 

When does the trust end?

An SNT will end when the funds are depleted or are no longer needed by the beneficiary. This could be because the beneficiary dies, no longer needs government benefits, or has become otherwise ineligible for government benefits.

What happens if the beneficiary dies and there are still funds in the trust?

Suppose the beneficiary of the SNT dies and there are still assets remaining in the trust. In that case, they will be distributed to a remainder beneficiary whom you have named in the trust language.

Goals That Are Accomplished With Supplemental Needs Trusts

  • Alleviate your concerns about protecting your loved one’s eligibility for government benefits.
  • Maximize the amount of public and private resources available to assist you or your loved one.
  • Help you address the planning needs of other family members of your family.

Contact Our Experienced Special and Supplemental Team Today

At The Legacy Elder Law Center, we are committed to protecting your loved one’s inheritances and personal assets. We help level the playing field for those who must compete in life with a disadvantage. We have the experience necessary to minimize the risks of future uncertainty by making sure your planning for your loved one will be rock-solid and sustainable.

About the author

Rory Clark

Rory has more than 30 years’ experience practicing elder law, estate planning, asset protection, Veteran’s affairs, and special needs planning. Through his personal journey, Rory not only understands the complex legal issues involved as a professional but also the intense emotional issues as a caregiver.