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Special Needs Trust Rules: What You Need to Know

Special Needs Trust Rules: What You Need to Know
Sage Settlement Consulting

Individuals with disabilities have unique medical and financial needs that require careful long-term planning. Special Needs Trusts can improve quality of life by offering asset protection, access to goods and services, and preservation of needs-based benefits. As with any trust, the beneficiary and trustee must meet strict guidelines. Here's what you need to know.


Who Qualifies for a Special Needs Trust?

To qualify for a Special Needs Trust (SNT), an individual must meet Social Security Administration (SSA) disability standards. When choosing a Special Needs Trust, considerations include the funding source and amount, needs-based benefits eligibility (e.g., Medicaid, SSI, etc.), income, age, and long-term prognosis.

What can a Special Needs Trust be used for?

An SNT can be used to pay for goods and services not otherwise covered by government benefits. Examples of allowable distributions include but are not limited to clothing, transportation, home modifications, personal hygiene products, and more. All distributions must be made for the sole benefit of the individual with a disability.


First-Party Special Needs Trust

First-party SNTs are funded with the beneficiary’s assets and must be irrevocable. Upon the beneficiary's death, any funds remaining in the trust must first reimburse Medicaid for any services provided. The beneficiary must be under the age of 65 when a first-party Special Needs Trust is established.

Third-Party Special Needs Trust

Third-party SNTs are funded with assets belonging to someone other than the beneficiary and can be revocable or irrevocable. Upon the beneficiary's death, the remaining funds are not subject to Medicaid payback if the trust is irrevocable (revocable third-party trusts are subject to Medicaid reimbursement). There are no age restrictions for a third-party Special Needs Trust.

Pooled Special Needs Trust

A First-Party Pooled SNT (PSNT) provides a lower-cost alternative to a first- or third-party SNT. Using the beneficiary’s assets, an individual sub-account is established within the PSNT. The PSNT is owned and administered by a non-profit organization. There is no age limit; however, some states may impose a penalty if the PSNT sub-account is established for a beneficiary over age 65. The funds remaining in the account are subject to Medicaid payback provisions upon the beneficiary’s death.

Contact Sage for Special Needs Trust Assistance

Sage partners with a broad range of Special Needs Trust providers and estate planning attorneys to make the trust planning process go smoothly. For more information, contact your Sage settlement consultant today.

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