A Supplemental Needs Trust (SNT) can only be established for an individual who is (a) disabled and (b) under the age of 65. The trust pays for supplemental needs and luxury items not provided by government entitlements (SSI, Medicaid), such as medical or dental treatment not covered by the government benefits, cosmetic care, vacations, travel companions, etc.
With a supplemental needs trust, a financial safe haven is created for a person with special needs without leaving that person ineligible for SSI and Medicaid benefits.
SNTs were originally invented to allow parents of children with developmental disabilities to provide for them after they grow up without making them ineligible for public benefits (like SSI and Medicaid). Ordinarily, if a parent set up a trust fund for their disabled child with $100,000 in it (for example), this would make them ineligible for public health insurance such as Medicaid. To avoid this, lawyers created special trust funds, which are structured in such a way that they do not impair a person’s eligibility for public benefits. They supplement the disabled beneficiary’s benefits, rather than replace them; hence the name Supplemental Needs Trust.
Another way that SNTs are used is to shield excess income for Medicaid purposes. By using a SNT in this way, a disabled Medicaid recipient can actually keep the benefit of almost all of their income, rather than having to pay a portion of it towards the cost of their care.
A SNT can also be used where a disabled person under age 65 receives a lump sum, such as a retroactive Social Security award, inheritance, medical malpractice recovery or personal injury settlement. Ordinarily, this asset would make the individual ineligible for Medicaid, SSI, and other benefits. By transferring it to a SNT, the person can remain eligible for all their benefits, and use the money in the SNT to supplement their regular income for years to come. A SNT is often used for the placement of settlement proceeds into such trust by court order. If the recipient of funds from a settlement or court award of funds is a minor or incapacitated, a court order will generally authorize the creation of the SNT and the placement of the individual’s funds into the SNT.
Where there is an expected award from a personal injury or medical malpractice action prior to settlement or compromise order, the responsible relatives or the individual should consult with an attorney well versed in entitlements so that a SNT can be part of the settlement or compromise award.
Our firm has years of experience working with the disabled in assisting them with keeping most of their income rather than having to pay it towards the cost of their healthcare. It is never too early to begin the process of special needs planning.