LEGAL GUIDE
Written by attorney Mark Wayne Breneman | Jun 29, 2010

Special and Supplemental Needs Trusts in Minnesota for Children and Adults with Disabilities

In Minnesota, a distinction is made between a trust used to protect assets and/or income from reimbursement for public assistance benefits. A Special Needs Trust is one created to receive the income or assets that belong to the disabled person, or which the disabled person is entitled to receive. A Supplemental Needs Trust is one created to receive and hold assets or income from someone other than the disabled person, such as a parent or other relative. The names differ in other states. For example, in some states, a self-settled Special Needs Trust equates to a Special Needs Trust in Minnesota, while a grantor Special Needs Trust equates to a Supplemental Needs Trust in Minnesota. In some states the term Special Needs Trust applies to all such trusts without any special qualifier terms. In all cases, both types of trusts are created to provide the same benefit for the disabled person: they provide a legally acceptable way to allow the disabled beneficiary of the trust to receive some or all Social Security Disability Income or Medicaid benefits.

In all cases, the trustee of these trusts must be very careful not to pay for certain items needed by the disabled beneficiary. In very general terms, we could say these items encompass basic living needs, such as food and shelter. On the other hand, items or expenses that are not basic needs of any individual can be paid for. Payments must not be made to the disabled beneficiary. For example, if the disabled person lives independently, the trustee could pay for lawn-mowing or snow removal services, entertainment, vacations, cab or bus fare, etc. without causing a reduction in Medicaid or Social Security Disability benefits.

The funds held in the trust can be maintained by the trustee of the trust, which often is a family member. In this case, the trustee has a full fiduciary duty to maintain the assets in a manner in which a prudent person would maintain them. The trustee is obligated to provide a regular accounting of spending from the trust. It is advisable that a separate checking account be maintained for the trust. Funds can also be placed in a pooled trust, where they are comingled with those of other trusts and managed professionally. Certain organizations establish these pooled accounts to benefit the disabled persons they serve.

The creation and maintenance of these kinds of trusts are relatively complicated and it is highly recommended that any family looking to establish them seek legal counsel with significant experience in this area of law.

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