A third party Special Needs Trust (SNT) is a trust established by one person for the benefit of another person who has a disability. The assets that fund the trust belong to someone other than the person with a disability. That is why we call it a “third party” SNT. The purpose of the SNT is to provide supplemental funds to the person with the disability without displacing other sources of funds that can pay for medical care or medical services. A person called the “Trustee” has the job of managing the trust for the benefit of the person with a disability. The person with a disability that benefits from the use of the funds in the trust is called the “Beneficiary.”
The Trustee can be a relative such as a spouse or adult child of the Beneficiary, or the Trustee can be a corporate or professional person, although these folks typically require payment for their services. The Trustee is in charge of deciding how to invest the assets in the trust and whether to pay for things or services from the trust. The Beneficiary does not have the ability to force the Trustee to make distributions from the SNT. Because the Beneficiary cannot compel the Trustee to make distributions from the trust, the assets in the trust are not “counted” by Medicaid programs or other means-tested programs that may pay for services, such as long term care in a nursing facility or at home. Having these extra funds in a SNT allows the public benefit (Medicaid) to serve as the first payor for care. Then, the SNT can supplement that care to provide extra caregivers or extra services that would not be available to the Beneficiary if he or she otherwise had no assets available. Third party SNTs are also a wonderful way to manage funds for a Beneficiary who is not capable of handling money or someone who may be preyed upon by people seeking to take advantage.
When the Beneficiary dies, the trust can be used to pay for the final expenses of the Beneficiary if these are not already secured. Then, funds in the third party SNT are distributed according to the terms of the trust. The public benefits programs do not have a right of reimbursement from the third party SNT.
If you would like more information about these and other planning opportunities, contact Elder Law of East Tennessee at 865-951-2410.