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Philadelphia PA Estate Planning Blog

Thursday, March 25, 2010

Special Needs Trusts

Special Needs Trusts are designed to permit financial resources to remain available to assist a disabled individual who receives or may receive in the future, Medicaid/Medical Assistance and SSI benefits. The trust, when set up properly, protects the resources from im

Special Needs Trusts are designed to permit financial resources to remain available to assist a disabled individual who receives or may receive in the future, Medicaid/Medical Assistance and SSI benefits. The trust, when set up properly, protects the resources from immediate invasion by Pennsylvania Department of Public Welfare (DPW).

When setting up the trust, one must clearly state that the trustmaker is SUPPLEMENTING public benefits, not supplanting them. The trust must be irrevocable, and must allow the trustee (person making the distributions) to have complete and unfettered control over those distributions. Distributions should never be made directly to disabled person. Instead, distributions should be used to pay vendors for medical equipment, entertainment, etc. for the benefit of the disabled person.

Types of trusts:

Self-settled trust: A self-settled trust is funded with the disabled person’s own money. In Pennsylvania, the commonwealth must be listed as initial beneficiary upon passing of disabled person to recover costs of Medical assistance, etc.

Third party trust: A third party trust is created by one person for the benefit of another (i.e., mother creates trust for disabled daughter). Unlike a self-settled trust, the Commonwealth of Pennsylvania has no right to seek reimbursement for Medicaid, unless they are added as a beneficiary, in which case, they WILL likely attempt to recover appropriate expenses

Pooled trust: This kind of trust involves a non-profit fiduciary with a “mutual fund” type of program where the funds are invested in a common fund but with individual accounts

Questions to think about:

-- Who is the trustee? Corporate trustee or someone in the family?

-- How much money should be in the trust?

-- Does your attorney have experience writing SNT’s?

 

The rules for SNT’s are tricky and complex. Make sure you have an attorney who is experienced in special needs matters draft the trust, and advise you on all matters relating to the trust.


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