The ABCs of SNTs (Special Needs Trusts)
In December of 2016, President Obama signed the 21st Century Cures Act, which gave individuals with disabilities the ability to create their own special needs trust (SNT).
This was a huge change from prior law: Individuals with disabilities who didn’t have a living parent or grandparent were not previously allowed to establish their own SNT. An SNT is a fund that is administered by a Trustee for the benefit of the person with disabilities. Let’s talk about SNTs so that we’re up to speed on what they are and how they work. There are two types of SNTs: a General Support SNT and a Supplemental Care SNT.
A majority of SNTs are of the Supplemental Care variety, which generally act as a secondary source of benefits for the beneficiary after his or her government benefits have been paid. Unlike other trusts, assets owned by a Supplemental Care SNT are not considered “available resources,” which protects the SNT beneficiary from becoming disqualified from needs-based benefits. This differentiates a Supplemental Care SNT from a General Support SNT. When considering which type of SNT may fit the needs of yourself or your loved one, ask whether the assets and resources available to the beneficiary are likely to cover the costs of supporting and caring for him or her during his or her lifetime. If the money allocated to the SNT will be able to care for the individual in every aspect of life, then a General Support SNT will suffice. On the other hand, if the individual may still need some government support for disabilities, then a Supplemental Care SNT is the better option. For many families, the goal is to maximize the resources available to their family members, including government benefits, which is more easily accomplished with a Supplemental Care SNT. Features of a SNT include its ability to fund service providers, such as domestic or personal aides. Additionally, SNT assets can be utilized to pay for the beneficiary’s residence to render it accessible. Other SNT disbursements can include funds for hobbies, educational opportunities, professional services, and more. To create an SNT for another, you may establish it through either a will or living trust; to create an SNT for yourself, you may establish it through a standalone SNT document. An SNT can be funded by a third party (called a Third Party SNT) or with the beneficiary’s assets (called a First Party SNT). Federal law requires that the SNT provide for the reimbursement of any Medicaid (Medi-Cal in California) monies that have been paid on behalf of a beneficiary.
If you or someone you love may be in need of an SNT, be sure to contact your estate planning attorney. Based on: https://www.americanbar.org/newsletter/publications/law_trends_news_practice_area_e_newsletter_home/0501_estate_financialplanning.html