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Special Needs Trusts

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In Trusts and Estates | On May 12, 2017

A “special needs trust” (SNT) usually means a trust for the benefit of someone who is receiving some form of governmental assistance, such as SSI, SSDI, or other federal, state, or local benefits.  A typical example is parents setting up a trust for a child who has a disability of some kind and, relatedly, is receiving governmental assistance.  The governmental assistance that the child is receiving usually has some form of asset or income restriction.  Accordingly, SNTs are drafted so that the beneficiary can receive trust distributions only if they won’t act to disqualify the beneficiary from any governmental assistance or benefits that the beneficiary is receiving.

Sometimes SNTs are stand-alone and specific to the child, and sometimes they exist only to protect the share that a beneficiary is to inherit from a parent’s overall estate under a more general will or trust.  Sometimes an SNT is funded when it’s created, and sometimes it’s funded only when the grantor dies.

SNTs may need to qualify before a governmental authority in some instances — such as a court authorizing the establishment of an SNT to hold a minor’s personal injury settlement.

Grantors should be particularly careful in selecting the trustee of an SNT.  If trusted relatives or friends are not suitable, organizations such as Delaware Care Plan (http://www.delawarecareplan.org/) may be able to serve as the trustee, though a trade-off is typically that the trust fund unspent at death will go to the organization’s general trust fund.  Alternatively, some banks and trust companies are willing to serve as the trustee of SNTs.

SNTs are relatively straightforward when one person creates them for another’s benefit.  A more complex variety is found when someone wants to create an SNT for himself or herself.  As the grantor/beneficiary is usually experiencing some form of disability, competency concerns are heightened.  And many states don’t allow grantors — even sympathetic grantors who may be suffering from a disability — to put their assets into a trust beyond the reach of creditors (or designing persons).

Consult your estate planning advisors with any questions.  Visit The Connolly Gallagher Trust & Estate page by clicking here.

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