Demystifying Special Needs Trusts
There may come a point in your life where you’ll need to have a special needs trust. Maybe you’ll be designated as a trustee or have a trust for your child. What does all this mean?
This article focuses on a special needs trust.A special needs trust (SNT) is a trust preserving the beneficiary*s eligibility for government benefits including Medicaid and Supplemental Security Income. Since the beneficiary doesn*t own the assets in the trust, they are eligible for benefit assistance programs with an asset limit. The trustee will supplement but not replace the beneficiary*s government benefits. Supplemental Need Trust are created to help cover costs not covered by Medicare or Medicaid.
A first-party SNT, also called a *self-settled* or *(d)(4)(A) trust,*is funded with assets or income that belong to an individual with a disability. Federal law states the beneficiary must be under the age of 65 when the trust is created and funded. Usually funding comes from a personal injury settlement or inheritance.
A third-party SNT,is funded with assets belonging to a person that is not beneficiary. No funds of the beneficiary are used for the trust. Typically, funding comes from gifts, inheritance from and life insurance. This trust doesn*t have to pay Medicaid back if terminated, the person who created the trust chooses how the trust estate is distributed when the beneficiary dies.