Supplemental Needs Trust - Questions Answered Part 1

SUPPLEMENTAL NEEDS TRUSTS





• What is a supplemental needs trust?

Supplemental needs trusts (also known as "special needs" trusts) are drafted so that the funds will not be considered to belong to the beneficiary in determining his or her eligibility for public benefits, such as Medicaid, Supplemental Security Income (SSI), or public housing. These trusts are designed not to provide basic support, but instead to pay for comforts and luxuries that could not be paid for by public assistance funds, such as education, recreation, counseling, and medical attention beyond what is required simply to maintain an individual.

• Who can create a supplemental needs trust?

Very often supplemental needs trusts are created by a parent or other family member for a disabled child (even though the child may be an adult by the time the trust is created or funded). But the disabled individual can often create the trust himself or herself, depending on the program for which he or she seeks benefits. Medicaid is the most restrictive program in this regard, making it difficult for a beneficiary to create a trust for his or her own benefit. But even Medicaid has a "safe harbor" allowing for the creation of a supplemental needs trust with a beneficiary's own money if the trust meets certain requirements. This is sometimes called a "(d)(4)(A)" trust, referring the authorizing statute.

• Must the supplemental trust be irrevocable?

Yes, if it is created and funded by the person seeking public benefits himself or herself. No, if it is created and funded by someone else for the benefit of person receiving or seeking public benefits.


• Who can serve as trustee?

Choosing a trustee can be a difficult decision. The basic question to consider is whether to choose a professional trustee (such as a bank orhttp://www.cohenoalican.com/) or to use family. Family and friends can serve as trustee, but it is important to consider whether they have the experience and qualifications to serve in this role. The only person who cannot serve as trustee is the beneficiary themselves as this could disqualify them for public benefits.

When choosing a trustee, the factors to be considered include the cost of the available parties, relative investment experience, and flexibility and bureaucracy. Additionally, the trustee’s knowledge of public benefits programs and their regulations, as well as the beneficiary’s special needs and circumstances, should be considered. Often it can make sense to split the necessary trustee roles, with a bank or trust company handling investments and accounting, a family member or social worker taking care of planning for the beneficiary and disbursements, and an elder law attorney advising on public benefits issues. This can be done through multiple trustees, or a single trustee advised by individuals with the necessary knowledge and experience.

Cohen & Oalican provide a full spectrum of services for the elderly, for disabled adults, and for the families.