Wrapping up our series on special needs trusts (SNTs), we wanted to take a look at how these types of trusts could be set up in order to protect the financial interests of the young adult beneficiary.
Who Can Establish an SNT?
SNTs must be established by the disabled adult (if they’re above 18), parent, grandparent, legal guardian, or the court. Disabled adults now can fund their own trusts if they have the mental and physical capacity to do so. If the beneficiary is under 65 at the time of the trust’s creation and if the assets are placed appropriately, then those assets are not tallied for public benefits.
When the State Can Inquire About the SNT
In (d)(4)(a) trusts like SNTs, the trustee must notify the state if there are any expenses from the trust of $5,000 or more. Many families don’t know this and are blindsided when the state comes calling, asking for detailed records of the trust’s accounting. (This is why it’s crucial to have the trustee or facilitator keep accurate and detailed financial records.)
This especially matters if the SNT will be partly funding treatment or care for the disabled adult, in addition to income from other sources. If the trust has property in it, that may bring up additional issues and require more facilitation and trustee costs (if it’s not kept within the family).
A Word About Beneficiary Designations
A good estate planning attorney will help highlight the need for appropriate beneficiary designations. It is so important to ensure that assets are flowing correctly to the trust and the right assets are in the trust’s name. One of the most common problems families run into is leaving assets in the individual’s name instead of the trust, which presents issues for the young adult’s asset allotment when applying for benefits and potential tax burdens.
SNTs can be a great way to set aside resources for disabled children or adults without affecting their ability to qualify for public benefits. However, these should be created and executed with the help of a professional estate planning attorney who understands the complex nature of these vehicles. Call The Law Offices of Rusty Williard today at (601) 824-9797 to learn more.