In a prior post, we started discussing what a special needs trust (SNT) is and how it can be effective for families with loved ones who endure significant disabilities. There are additional considerations about SNTs, especially with some lesser-used but still important versions.
A Third-Party SNT, Continued
Another type of third-party trust is a “sole benefit Medicaid trust,” which is a specific situation where the grantor (the person creating the trust) is attempting to go on Medicaid and is wishing to make a gift to a trust for a related child before going on the program. These also have payback requirements in the general Medicaid system.
A Testamentary Trust
Another trust option is a testamentary trust, which isn’t created under a will but rather not formally funded until the grantor passes away. While this can create a clear separation of resources, it also doesn’t take into account every emergency situation if the grantor is still alive but unable to make decisions for him or herself. It also means that any other family who would want to leave assets or resources to the beneficiary would have to do so through other trusts since this type of trust is very specific.
The Question of Revocability
A common concern is about the ability to change the SNT over time, especially if the beneficiary’s disability situation may change. May choose to open a revocable SNT so that it’s much easier to make changes instead of being locked into specific terms with an irrevocable SNT. The one positive of an irrevocable SNT is for someone who wants to make a gift as assets out of their estate. There are also tax considerations across the board here that should be discussed with a qualified CPA.
An SNT is not something you should draft on your own. Especially if you’re trying to maintain a beneficiary’s eligibility for public assistance, there are nuances in the document’s language and spirit that need to be carefully managed to keep their best interests in mind. If you’re thinking about creating an SNT in Mississippi, call The Law Offices of Rusty Williard today at (601) 824-9797 to schedule a free consultation.