American Indian Owned Law Firm

How an SNT can protect a loved one after you’re gone

On Behalf of | Jun 24, 2022 | Probate & Estate Planning

One thing that spurs people to set up an estate plan is having a child or other family member with a physical or mental disability whom they care for and support. They want to ensure that their loved one will continue to get the care they need after they’re gone.

If your disabled family member is receiving support from government-sponsored programs like Medicaid and Supplemental Security Income (SSI) and you don’t set up their inheritance properly, they’ll lose that support – even if the assets you leave them are managed by a guardian or trustee. That’s because these are “means-tested” programs, so the inheritance could disqualify them from getting this needed money.

That’s where supplemental needs trusts come in. Sometimes, they’re referred to as “special needs trusts.” Either way, they’re typically just called SNTs.

While money from government programs can cover necessities, you want your loved one to continue to have the things you can provide them. SNTs are meant to cover the cost of caregivers, specially equipped vehicles, modifications to their home and other things that help them live as fully and comfortably as possible without losing their benefits. However, depending on the type of trust, these government programs may have to be reimbursed upon the beneficiary’s death.

Third-party vs first-party SNTs

There are two basic types of SNTs but most, however, are third-party trusts. That means the assets in the trust are supplied by a third party (typically their parent or guardian who’s setting up the trust for the beneficiary). Because these assets don’t legally don’t belong to the beneficiary of the trust, Medicaid, SSI and other programs don’t have to be reimbursed when the beneficiary dies.

First-party trusts are established with the beneficiary’s own money. This is generally done if the beneficiary received a large settlement or reward from a lawsuit. This is typically set up if the person became disabled due to a car crash or other injuries for which someone else was held liable. While first-party trusts still allow a beneficiary to receive public benefits, those benefits have to be repaid upon their death.

Providing for a disabled loved one after you’re gone requires careful thought and planning. Having experienced legal guidance is critical.