Creating Trusts are a way of slowing down time. The passage of time deposits joyful experiences, mundane sameness and occasional crises into our laps. A crisis and its reactions often lead to loss of security and financial unsteadiness. Trusts anticipate crises as well as life’s milestones and provide a roadmap for security. Trusts can protect assets, income, and even certain vulnerable beneficiaries from their own proclivities. Trusts can bypass complex legal procedures and offer continuity in resource management. Most importantly, Trusts offer safe passage for those times when time gets away from you and careful consideration and planning may not be available.
There are several types of Trusts. The goal is to match a Trust to a client’s current and future requirements. Supplemental Needs Trusts (aka SNT’s) are protective instruments for the disabled who may receive entitlement benefits such as Medicaid but still are allowed to retain resources to maintain their lives in the community. SNT’s can be created with money owned, inherited or awarded to the disabled person individually. SNT’s can also be created by parents or other Third-Parties for the benefit of a disabled person. Sometimes SNT’s must be approved by a Court. Pooled SNT’s operated by not-for-profit agencies protect a disabled person’s Medicaid excess income and assets.
In 2016, the federal Special Needs Fairness Act was enacted (adopted in NY in 2017). This Act allowed disabled adults under 65 years of age who had capacity to create SNT’s for their own benefit. Before the Act’s passage – a parent, grandparent, legal guardian or court had to establish an SNT for the disabled beneficiary. This made accepting an inheritance a complex and expensive procedure for many disabled beneficiaries. Now, SNT’s can be created more simply. Trustees of SNT’s can be family members or other individuals close to the beneficiary. The Trustee’s job is to maintain records and use the resources to pay for items and services that directly benefit the disabled person -including travel expenses, home furnishings and other lifestyle maintenance options.
Self-created SNT’s have a “payback” provision that allows New York State to recoup expenses paid out for the care of a disabled person before the remaining funds held in the SNT are distributed to the successor beneficiaries. SNT’s created by a third party – including parents are not required to have that provision and can direct that any remaining monies go to the beneficiary that they choose.
SNT’s are created for the benefit of a disabled individual under 65. No new assets can be deposited in a SNT after that disabled individual turns 65, but the existing assets will still be deemed exempt from Medicaid consideration. The exception to this rule covers Pooled SNT’s which allow a disabled person of any age to fund a SNT, but when the disabled individual dies the remaining funds stay with the not-for profit agency administering the Pooled Trust.
Ultimately, SNT’s are a vehicle to allow caregivers to provide meaningful support without financially draining the family’s resources. All demographic trends point to an increasingly aged population with higher care needs. SNT’s exist to prevent life’s bumps from turning into life’s craters.