Special Needs Trusts

This excerpt is from an article about Special Needs Trusts by Danny Alvarez which appeared in the September 2009 edition of the Paraclete – a publication of the St. Petersburg Bar Association:

What is a SNT (Special Needs Trust)? An SNT is a government benefits preservation vehicle.  It helps to keep a beneficiary's assets in trust while maintaining their government provided assistance. 

Which type of trust should you use?  Essentially there are three types:  Disability trusts (42 U.S.C. §1396(d)(4(a)), Pooled Trusts (42 U.S.C. §1396(d)(4(c)) and Third Party SNTs.

Disability Trusts: 

* Beneficiary must be under 65 and disabled as defined by U.S.C. §1382c(3)(A).

*Can be established by court order, parent, grandparent and legal guardian.

*Must be established with beneficiary's assets including settlement proceeds.

* Must be administed for the sole benefit of the beneficiary.

* Must include a payback provision at death or termination of trust to reimburse the government.  If there are any funds left after reimbursement, the grantor can determine the residual beneficiary.

Pooled Trusts:

* No age requirement.

* Must be disabled as defined by U.S.C. §1382c(3)(A).

* Can be established by court order, parent, grandparent, legal guardian and/or the beneficiary.

* Must be established with the beneficiary's assets.

* Must be administered for the sole benefit of the beneficiary.

* Includes a payback provision at the death of the beneficiary to reimburse the government.  If there are any funds left after reimbursement, the non-profit will retain the funds and distribute them to other non-profits.

* Trust must be administered by a non-profit organization.

Third Party Trust:

* Similar to a traditional trust with special needs turst language included.

* No age restriction.

* Funded with third party assets.

*No payback provisions.  The grantor is free to direct how the remaining assets with be distributed at the beneficiary's death.

Who Needs a Special Needs Trust?  Mr. Alvarez lists examples including:  someone with a physical disability; a young couple with an autistic child; a legal guardian of an elder ward; a young man disabled in an auto accident; or a family looking to care for a mentally ill loved one.  The possibilities are many with a common element being a defined disability.

If you are interested in learning more about Special Needs Trusts, you can read Mr. Alvarez's full article in the Paraclete or email him at danny@bostonassetmanagement.com or danalvarez@tampabay.rr.com.



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