"TO SNT OR NOT TO SNT, THAT IS THE QUESTION"
Should You Establish a Special Needs Trust?
By: Bridget
O'Brien Swartz
Shakespeare's well known verse in the play of Hamlet is apropos
in the area of public benefits planning. You or a loved one is
disabled, and eligible for and receiving public benefits
assistance, namely,
Supplemental Security Income (SSI) and
Medicaid benefits. Your client will soon be the recipient of
proceeds from a personal injury settlement, inheritance or other
source. What should you do? The answer seems obvious.
Establish a
special needs trust ("SNT"). Such a trust can be
established for an individual who is disabled. Their income
and/or assets can be funded, thereby maintaining their eligibility
for public benefits and providing a means by which to supplement
their needs.
Hold on! Before establishing a SNT, do not forget the
requirements under federal law that must be met:
- The individual must be disabled according to Social Security
(SSA) criteria;
- The trust must be established before the disabled person
reaches age 65;
- The trust must be established by a parent, grandparent,
guardian/conservator, or court of law; and
- The trust must provide for reimbursement to Medicaid the cost
of medical services it has provided to the beneficiary.
- Determine whether or not there are additional
state requirements that must be met as well.
Each state may have requirements to comply with their
statutes.
Establishment of a special needs trust is actually a relatively
simple matter once the decision has been made to create one. What
is often not so simple or straightforward is evaluating whether or
not an individual's circumstances merit establishment of such a
trust or whether the individual will be best served by such a
trust.
No One Size Fits All Solution
There is no cookie cutter answer. Each case must be evaluated
taking into account individual circumstances. What is the age of
the individual, their life expectancy, and nature of their
disability? To what extent are the public benefit programs meeting
their needs? Are there alternative sources of medical coverage,
such as through a parent's employer-sponsored group health plan or
the Pre-Existing Condition Health Insurance Plan? What is the gap
between what is being provided by the public benefit programs and
the individual's level of need? Oftentimes in personal injury
matters, a life care plan report is completed detailing anticipated
expenses over the individual's life expectancy. This life care plan
report can be useful, but frequently must be modified to delineate
what the individual will actually need and utilize, as well as the
extent to which private and public resources will provide for such
needs.
What Other Benefits Do They Already
Receive?
What public benefits is the individual currently eligible for
and receiving, as well as what are they potentially eligible for
and receiving? If they are eligible/receiving SSI and Title XIX
Medicaid, then a special needs trust will preserve such benefits.
If they are eligible/receiving benefits other than SSI or Title XIX
Medicaid, such as Nutritional Assistance (formerly known as Food
Stamps), TANF (Temporary Aid to Needy Families), Section 8 through
HUD, then a special needs trust may not preserve such benefits.
Maybe the benefits for which the individual is eligible or may be
eligible are not based on financial need, such as Social Security
Disability Insurance (SSDI) and Medicare, or they do not consider
resources in determining eligibility or benefits. In such
instances, the receipt of funds, such as a personal injury
settlement, may not affect eligibility and a special needs trust
may not be necessary.
What is the Amount of the
Settlement?
How much will the individual receive from the settlement?
Although there is no clear benchmark, if nominal, then there may be
alternatives to a special needs trust, such as immediately
"spending down" the funds on exempt or excluded resources. For
example, to determine SSI and Medicaid eligibility, real property
that serves as the individual's primary residence, one vehicle,
household goods and personal effects, a burial plot, and burial
arrangements are excluded and settlement funds could be used.
Legitimate debts can be paid. Services can be pre-paid for a
limited period of time.
How Can the Special Needs Trust Be
Used?
How can the special needs trust be utilized? For purposes of SSI
and Medicaid, as with most other public benefit programs,
disbursements of "income," which is typically defined as food,
shelter, or cash, may impact the benefit amount or eligibility. A
state may have additional restrictions on what may be paid out of
the trust for Medicaid eligibility purposes. With the
foregoing in mind, a special needs trust can generally be used to
pay the following: Other "utilities" such as phone, cable and
internet service; the cost of the purchase of a vehicle, its
maintenance, registration and insurance; the cost to modify a home
for handicap-accessibility or purchase such a home; pre-paid
burial/funeral arrangements; educational and recreational expenses;
television, computers and other electronic devices; vision and
dental; durable medical equipment; therapy, medications,
alternative treatments; attendant and respite care, and the list
goes on.
The above is merely a glance into the various factors to be
taken into account before jumping head first into a special needs
trust. This is an arrangement that you do not want your client to
go into hastily. You must be informed and know what to
anticipate. You, and the professionals assisting in making
this decision, will need time to gather the necessary information
and evaluate the options. "To SNT or not to SNT, that is the
question," and the answer is not readily apparent. When the
decision to establish a SNT is made after thorough due diligence,
then you can be assured that you or your loved one will benefit
from the arrangement.
About the author:
Bridget O'Brien Swartz is a partner at the Phoenix law firm of
Jaburg Wilk where she heads the
Special Needs Planning group. She is an Arizona State Bar
Certified Specialist in Estate and Trust law and is certified by
the National Elder Law Foundation as an Elder Law Attorney. Bridget
is a Southwest Super Lawyer and was named a 2011 and 2012 "Best
Lawyer" in Elder Law and Trusts & Estates. Bridget
assists clients with special needs planning to ensure that public
benefits are preserved. She is a frequent contributor to
elder law journals and NAELA newsletters.
This article is not intended to provide legal advice
and only relates to Arizona law. It does not consider the
scope of laws in states other than Arizona. Always consult an
attorney for legal advice for your particular situation.
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