What Is A Supplemental Needs Trust?

What Is A Supplemental Needs Trust?

A Supplemental Needs Trust is established for the benefit of a person with special needs as long as the Beneficiary is not over the age of 65. and residing in long-term care without a reasonable expectation of discharge. Use of a Supplemental Needs Trust allows the Beneficiaries, to retain their government assistance and also have funds available for opportunities like advanced medical treatments, education, and leisure activities. The objective behind establishing a Supplemental Needs Trust is similar to that of a Special Needs Trust, which the subject of a previous blog article.

The trust’s “Grantor,” which is the title given to the person who establishes the Supplemental Needs Trust, may be a parent, grandparent, actually anyone other than the Beneficiary or the Beneficiary’s spouse. Similarly, funds in the trust may come from anyone other than the Beneficiary or the Beneficiary’s spouse. Grantors typically establish the Supplemental Needs Trust with their own assets through a Will or through a “stand-alone” Supplemental Needs Trust. In doing so, the Grantor may appoint herself or another person as the Trustee, who has the responsibility to disburse funds to pay for expenses of the Beneficiary not covered by government assistance. Funds from the trust are not allowed to be disbursed directly to the Beneficiary. Disbursements from the Supplemental Needs Trust can be made only to the person or entity providing the goods or services to the Beneficiary. When the Beneficiary passes away, the funds or assets in the trust are not subject to claim by the government; it is disbursed according to the terms of the trust agreement; i.e., to family members, friends, non-profits, or whomever the Grantor designates.

The information in this article just is a short overview of what there is to know about Supplemental Needs Trusts. The best way to learn more about a Supplemental Needs Trust offers is to schedule a consultation with an attorney in your state who specializes in this area of practice.

What Is A Special Needs Trust?

A Special Needs Trust is a trust established to meet the supplemental needs of a person with a legally defined disability who is under the age of 65. The trust is funded with funds or assets which already legally belong to the disabled individual. These can be assets that are already in their name, a cause of action on behalf of the beneficiary which will provide a settlement amount or jury award to the beneficiary from a personal injury or medical malpractice action; accounts on which the beneficiary is already named as a beneficiary payee or joint tenant; or the beneficiary’s interest in a property settlement in a divorce action. A Special Needs Trust is commonly called a “first party trust” because the trust is funded with assets which belong to the beneficiary.

The Special Needs Trust may only be established by the beneficiary’s parents, Guardian or conservator or by court order. Whoever is establishing the trust is called the Grantor. Once funded the trust can be used to supplement the government assistance provided to the beneficiary. These benefits can include advanced medical treatments, education, leisure, furniture, appliances and activities. Once the trust is funded the Trustee is the person who manages the trust funds and makes disbursements on behalf of the beneficiary. Disbursements can only be made for the benefit of the beneficiary and not for the beneficiary’s spouse or family members. Because the funds belong to the beneficiary prior to their placement into the trust a Special Needs Trust must contain a “payback provision”. This provision provides that upon the death of the beneficiary the trustee must first satisfy any claim by the state for medical assistance benefits provided to the beneficiary.

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