A Q&A on Supplemental Needs Trusts

Posted on: Nov 23, 2015

A Supplemental Needs Trust (SNT) is an incredibly useful Estate Planning tool. In this blog we feature some frequently asked questions and answers to help you understand how a SNT works and why a SNT might be appropriate for your estate.
Please keep in mind that this blog does not constitute legal advice for your specific situation. It is vital that you consult with an experienced Elder Law attorney who can analyze your needs and advise you on the best course of action with regard to your estate plan.
What is a Supplemental Needs Trust (SNT)?
A SNT is created to provide funds spent at the discretion of a trustee to benefit a disabled spouse or a spouse who may become disabled due to illness or advanced age and need Medicaid Long-Term Care benefits. A SNT can also be established to benefit a disabled child or grandchild, while maintaining their government needs-based benefits. Notably, a SNT for a spouse must be created by a Will.
Is there a difference between a Supplemental Needs Trust and a Special Needs Trust?
No, these terms are used interchangeably in the United States, although their usage may vary. “Supplemental Needs Trust” typically is used to describe the testamentary trust described above and its beneficiary is typically the surviving spouse. “Special Needs Trust” is typically used to describe a trust established by a third party to benefit a disabled child or grandchild, and may be created during lifetime (intervivos) or by a Will (testamentary). There are also first party SNTs where the grantor funds his or her own trust; however these are beyond the scope of this article.
How does the beneficiary access the funds in a Supplemental Needs Trust?
The beneficiary does not access the funds in a SNT. The distribution of the trust funds is entirely at the discretion of the trustee you select for the purposes you specify in the language of the trust where the beneficiary receives needs-based benefits. The trustee cannot distribute the funds directly to the beneficiary as this could compromise the beneficiary’s government benefits. Trust funds are not meant to provide for the things government benefits provide, like shelter and food. However, the trustee could use the funds from the trust to purchase certain goods or pay for services that enhance the beneficiary’s quality of life.
Who should I choose as a trustee?
You need to select someone you trust to control the trust’s administration and carry out your wishes. There are professional trustees who can serve if you do not have a suitable friend or family member. The trustee plays a vital role in the management of a SNT. It is important to select someone who is very familiar with the potential impact distribution of the trust assets could have on the beneficiary’s eligibility for benefits. The trustee must not make any distributions which could threaten the loss of these benefits.
What types of assets can I put into a Supplemental Needs Trust?
A wide variety of property and assets may be used to fund a SNT, including real estate, stocks, financial accounts, cash or just about any other form of property. Generally, if tangible property is used to create the trust, the trustee will have to authority to sell these items and use the cash to provide for the beneficiary’s needs. If real property is used, there should be liquid funds to pay for taxes and maintenance.
When does the trust end?
A SNT will end when the funds are depleted or are no longer needed by the beneficiary. This could be because the beneficiary dies, no longer needs government benefits or has become otherwise ineligible for government benefits.
What happens if the beneficiary dies and there are still funds in the trust?
If the beneficiary of the SNT dies and there are still assets remaining in the trust, they will be distributed to a remainder beneficiary whom you have named in the trust language.
If you would like to learn more about SNTs, or if you are interested in creating one, please contact Elder Law Group.