What is a Special Needs Trust?
Special Needs Trusts (SNT) are utilized for a beneficiary on needs-based public benefits. If a person receiving these benefits obtains an inheritance directly, they may lose their benefits. In these situations, we see clients give shares to a beneficiary through an SNT – which, if done correctly, will accomplish several things:
1.) They will maintain their benefits while also having inherited funds available to supplement those benefits. Notice we said supplement, not supplant.
2.) It does not provide direct access to an inheritance for this beneficiary, allowing the clients to maintain control of the funds upon their death and after the SNT beneficiary's death.
3.) Allows clients to appoint a trusted individual or professional fiduciary to control the funds for the beneficiary's benefit.
4.) Upon the beneficiary's death, the assets within the SNT will NOT be subject to reimbursement from state or federal agencies since those assets never directly belonged to the beneficiary. These assets will go back to the additional beneficiary your client selects. They will not go to the SNT beneficiary.
Our Approach
At EncorEstate Plans, we approach this increasingly common scenario in a variety of ways:
1.) For clients that know they have a beneficiary with special needs, we enable clients to put that share into a SNT for the benefit of the beneficiary upon their deaths.
2.) In ALL trust-based estate plans we produce, a trustee can convert any beneficiary's share to a SNT if it is appropriate to do so at the time of the client's death. The ability to convert their share accommodates unexpected circumstances after the documents are signed.
3.) We allow flexibility within the documents for these situations – for example, if a client does not want one of their children to serve as trustee of the SNT, they can appoint another individual or professional trustee to serve in this capacity.
Please note, currently EncorEstate Plans does NOT do stand-alone SNTs. A stand-alone SNT would generally be useful if a client is looking to fund the SNT today. In most cases, the SNT is only needed after the clients die, so our documents will cover those situations.
Contact the support team at Encore if you still have questions on Special Needs Trusts. [email protected]