When planning for the future of a loved one with special needs, understanding the intricacies of financial tools is crucial. In Massachusetts, two common options for providing financial support are Special Needs Trusts (SNTs) and Supplemental Needs Trusts (SNTs). While both serve to safeguard the financial well-being of individuals with special needs, they differ in certain key aspects.
What Is A Special Needs Trust (First-Party SNT)?
A Special Needs Trust, or First-Party Trust, is typically established using the assets of the individual with special needs. This trust is often utilized when the individual receives a lump sum settlement, inheritance, or other significant financial assets. One primary advantage of an SNT is that it allows the person with special needs to preserve eligibility for government benefits such as Medicaid and Supplemental Security Income (SSI).
Key Features of Special Needs Trusts:
- Government Benefits Preservation: Individuals can maintain eligibility for essential government benefits by segregating the funds into a trust.
- Control Over Distributions: The trustee has discretion over how the funds are distributed, ensuring they are used to enhance the individual’s quality of life without jeopardizing benefit eligibility.
- Repayment Provision: Special Needs Trusts may include a provision requiring the trust to reimburse the state for Medicaid benefits upon the individual’s passing.
What Is A Supplemental Needs Trust (Third-Party SNT)?
A Supplemental Needs Trust, also called a Third-Party Trust, is established using assets contributed by someone other than the individual with special needs. Common contributors include parents, grandparents, or other family members. Unlike a First-Party SNT, a Supplemental Needs Trust does not require a payback provision to Medicaid, making it an attractive option for families wishing to leave an inheritance to their loved one.
Key Features of Supplemental Needs Trusts:
- Preserving Eligibility: Similar to a Special Needs Trust, a Supplemental Needs Trust allows individuals to retain eligibility for government benefits.
- Family Contributions: This trust is funded by family members, enabling them to provide financial support without jeopardizing the beneficiary’s access to essential services.
- Flexible Distributions: The trustee has the flexibility to use the trust funds for a wide range of purposes that enhance the individual’s quality of life, from education and housing to recreational activities.
The decision between a Special Needs Trust and a Supplemental Needs Trust depends on the specific circumstances of the individual and their family. If the individual with special needs is receiving or will receive a considerable sum of money, a Special Needs Trust may be the appropriate choice. On the other hand, if family members wish to provide ongoing financial support without impacting government benefits, a Supplemental Needs Trust may be more suitable.
Navigating the complexities of financial planning for individuals with special needs requires careful consideration of the available options. In Massachusetts, Special Needs Trusts and Supplemental Needs Trusts offer valuable tools for preserving government benefits and enhancing the well-being of loved ones with special needs. Consulting with a qualified estate planning attorney can provide personalized guidance to help families make informed decisions based on their unique circumstances.
