By Joel Krooks

For individuals with disabilities, maintaining access to public benefits like Supplemental Security Income (SSI) and Medicaid is essential. However, receiving an inheritance or financial gift can unintentionally jeopardize eligibility for these benefits. This is where a Supplemental Needs Trust (SNT) comes in.

What Is a Supplemental Needs Trust?

A Supplemental Needs Trust is a specialized legal document designed to hold and manage assets for the benefit of a person with a disability. The primary goal is to improve the beneficiary’s quality of life without affecting their eligibility for need-based government programs.

Key Goals of an SNT

1. Preserve Public Benefits Eligibility
   Public benefits like SSI and Medicaid have strict income and asset limits. An SNT ensures that assets intended to support the beneficiary do not count as personal resources under these programs’ rules.
2. Enhance Quality of Life
   While public benefits often cover basic needs such as housing and medical care, an SNT can pay for supplemental expenses—like education, transportation, personal care, recreation, and therapies—that aren’t covered by government programs.
3. Provide Long-Term Financial Support
   An SNT can be structured to manage funds throughout the beneficiary’s lifetime, offering stability and financial oversight.
4. Facilitate Estate Planning Goals
   For aging parents or family members, incorporating an SNT into your estate plan ensures that your assets will be used to support your loved one without unintentionally disqualifying them from vital public programs. It also allows for coordinated planning with other estate documents like wills, powers of attorney, and healthcare directives.

Types of Supplemental Needs Trusts

• Third-Party SNT: Funded with assets that never belonged to the beneficiary (e.g., from parents or relatives). This type of trust does not require payback to the state Medicaid agency upon the beneficiary’s death.
• First-Party SNT (Self-Settled): Funded with the beneficiary’s own assets, such as a legal settlement or unplanned for inheritance. These trusts must include a Medicaid payback provision.
• Pooled Trust: Managed by a nonprofit organization, with funds pooled for investment purposes but maintained in separate sub-accounts for each beneficiary. These can be an accessible option for families with more modest resources.

How Does an SNT Protect Eligibility?

Assets placed in an SNT are owned by the trust—not the beneficiary. This distinction is crucial because the beneficiary has no direct control over the trust funds, government agencies do not count the trust as a resource when determining eligibility.

Trust distributions are carefully managed by a trustee, who must follow strict guidelines to ensure the funds are used only for supplemental needs and do not interfere with benefit limits.

Conclusion

A Supplemental Needs Trust is a powerful tool for families and caregivers seeking to provide for a loved one with a disability, without endangering access to vital public benefits. Properly established and managed, Supplemental Needs Trusts offer peace of mind, financial security, and a better quality of life for the beneficiary.

At Littman Krooks, we can assist you with your special needs planning or estate planning and determining an estate plan that is best suited for you and your family. Contact our office today if you are interested in learning more about the estate tax exemption and annual exclusion amounts.