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Supplemental & Special Needs Trusts |
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Families with a child who has qualified for government funds as a result of a physical or mental disability face a dilemma when planning their estates. If the disabled child receives benefits from a government program, property inherited by that child, whether outright or in trust, could potentially disqualify the child from further participation in the government program.
Is there a solution to this dilemma? Fortunately, there is, through the creation of either a supplemental needs trust or a special needs trust (both referred to below as SNT).
The State of Minnesota and the federal government have recognized that a recipient of government program benefits may retain those benefits if he or she is the beneficiary of an SNT which provides benefits which do not duplicate any benefit provided by the government program. Examples of such benefits include the trustees’ purchase of a special van for the child’s transportation needs, or perhaps the payment of tuition for special training, etc.
There are two types of SNTs. The first is a supplemental needs trust established with property furnished by a third person, such as a parent or the parent’s estate. The second type of SNT is a special needs trust which is established with funds furnished by the challenged individual, including, possibly, proceeds from a settlement of a claim or other property which the challenged individual owned prior to his or her qualification for government benefits.
Special needs trusts and supplemental needs trusts have different requirements for the disposition of any trust property which remains at the time of the death of the challenged individual. Any property which remains in a special needs trust must first be used to reimburse the government agency which provided the government benefits to the deceased beneficiary, and any remaining property may be distributed to other family members or any other beneficiary. All of the property which remains in a supplemental needs trust, may be distributed to other family members or any other beneficiary.
A SNT may provide an opportunity for the family of a challenged child to provide benefits which enhance the child’s life without jeopardizing his or her government program benefits.
This article is intended to acquaint the reader with some general principles which govern supplemental and special needs trusts and is not intended to convey legal advice with respect to the reader’s specific circumstances. Specific planning opportunities which employ supplemental or special needs trusts require detailed legal analysis and drafting techniques and the reader is therefore encouraged to call one of the following attorneys who practice in the Trusts and Estates group at Quinlivan & Hughes, P.A. 320-251-1414.
Kevin A. Spellacy
John H. Wenker
Robert P. Cunningham
W. Benjamin Winger
Bradley W. Hanson
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