Alternatives to Supplemental Needs Trusts

Video

Hi folks. We’re back. It’s Andy Stautz at Stautz Law and I am continuing my discussion of supplemental needs trusts or SNT’s. The topic today is “what other options do you have?”  

Why Not Use a Supplemental Needs Trust (SNT)?

We talked about some use cases in the last video about when an SNT might be appropriate. Now we’re going to talk about other things you can do.  

So, you know, trusts are expensive to set up. They’ve got ongoing administration requirements, right? You need to find a good trustee, that can be expensive, you know, potential problems and just in the expense and complexity. So for some people, a trust is not appropriate even if they fit in one of those categories where an SNT might traditionally be used.  

Alternatives to an SNT

So there are, I think, three options.  

Alternative #1: Pooled Trust

One would be a pooled trust, which is itself a type of SNT. OK, but instead of setting up your own little trust for your own little beneficiary. It’s basically like… almost like a mutual fund, right?  

You kind of contribute to this pooled trust, this charitable trust that maintains assets for a lot of different people. And they, you know, your share is still calculated. So it goes to your beneficiary, but that takes a lot of the administrative cost and complexity out.  

The other benefit there is the remainder of the trust corpus gets to go to charity instead of being clawed back by Medicare or Medicaid, (which is a big feature of other SNTs which I’ve neglected to mention so far… Oh, well….)  

OK, so that’s one option. A pooled trust.  

Alternative #2: ABLE Accounts

Second option, ABLE accounts. These are basically like. . .IRAs. They’re a special, you know, statutory creation. They’re available here in Indiana and it’s like a savings account. It’s like a retirement account where the beneficiary recipient can have assets, can have resources held in this account to be used for, you know, certain qualifying purposes without losing their benefits status. So that’s … for the people that works for, that’s really good.  

It allows more autonomy to the benefits recipient. So if it’s a partial disability, you know? In the situation where there’s a little bit of room there to control, you know spending and some of these decisions, it’s really good.  

And again, statutory creation. So as long as you follow the rules, you know you’re good, you’re not trying to, you know, do an end run around anything. So ABLE accounts probably deserve their own talk, but a great option for lots of people.  

Alternative #3: Informal Arrangements

3rd and finally. Is the… is like the old school “Find someone else.” To, you know, hold the resources and keep the keep the aid going. So in a situation where parents have been giving some extra support to their child who’s receiving means tested benefits, it’s like, OK, well, you can give the money to a sibling. And have them continue the care after the parents’ death. You could give it to, you know, some trusted third party.

Again, you know behavioral risks there, right? Like things can go really wrong.  

But if things go right, it has the advantage of, you know, you don’t have to write a trust document. You don’t have to administer it. It’s very informal. UM. So. Certainly not suitable for all situations, but people were… people have been doing that for a long time and it can still work in the right circumstances.  

Conclusion

So (1) pooled trust, (2) ABLE accounts, and (3) just finding someone else to hold the money in an informal trust situation. Kind of three good alternatives.  

Again, that’s just general discussion. If you want specific legal advice, you need to talk to me for a planning meeting. Love to talk about these things with you. You can book online or you can give me a call. So hope we’ll talk soon and thanks for watching. Bye for now