Special Needs Trusts, also known as Supplemental Needs Trusts (SNT), play an important role in the planning for a disabled individual. Continuing from my last post, here are a few additional SNT options:
Pooled Self-Settled SNT
A pooled self-settled SNT is managed by a non-profit association. Although funds are pooled into the trust, a separate account is established for each individual beneficiary. Beneficiaries can be of any age. If he or she is over 65 years old, however, there is a penalty period for assets transferred to the pooled trust for Medicaid nursing home benefits. These trusts are usually utilized where there is no family member to act as a trustee or when the beneficiary is over age 65.
Depending on the terms of the pooled trust, the disabled person may be able to provide how the remaining balance of the account is to be distributed upon his or her death. This would, however, be subject to a payback to Medicaid. If the balance on death is retained by the pooled trust, then Medicaid is not entitled to a payback of the benefits paid.
Pooled income-only trusts play an important role when the disabled beneficiary has a fixed income that exceeds the monthly amount permitted by the Community/Home Care Medicaid program since contributing one's excess income is permissible. The trust will pay the disabled beneficiary's household expenses such as mortgage, rent and taxes. The pooled trust, in many cases, allows the beneficiary to remain eligible for Medicaid home care.
Sole Benefits Trust
This special type of SNT has been increasing in popularity. Generally speaking, a sole benefits trust (SBT) is administered the same as a third party SNT to preserve the beneficiary's eligibility for Medicaid or SSI. The third party parent funding the trust may also do so without incurring a transfer penalty for the purposes of his or her own eligibility for Medicaid and SSI.
A SBT can be funded with a lump sum or annuity, but must be fully funded before the beneficiary reaches the age of 21. In the situation where the beneficiary's ability to qualify for Medicaid or SSI is not a concern, the SBT can often be administered to provide for his or her general health, education, welfare, support, maintenance and comfort. When Medicaid or SSI eligibility is a concern for the beneficiary and the third party funding the trust, neither party (nor their spouses) may act as a trustee.
For anyone with a disabled child or grandchild, a properly drafted SNT can provide a level of comfort knowing that a significant step has been taken to ensure his or her future care and wellbeing. Start the discussion early and take action to secure the best type of SNT for your circumstances.