Supplemental Needs Trusts (SNT) Basics

Video

Good morning. It’s Andy Stautz at Stautz Law. I’m back today with another talk about basic estate planning techniques. Today’s topic is Supplemental Needs Trusts or SNTs for short. This is a concept I mentioned in another video and I realized I had never really explained what supplemental needs trusts are or how they work. So we’re going to do that today.  

What’s the Point of a Supplemental Needs Trust?

SNTs are a creature of benefits programs, really. So the basic situation is this: Medicaid, Supplemental Security Income are the two big examples of means-tested benefit programs, where the beneficiary receives benefits from the state. (The government, that is.) Because the the beneficiary has no resources, that is, assets, and also no income. You know, within certain low limits.  

So then the question is, What if a family member or a charitably minded individual–You know, whoever–If you want to give a Medicaid beneficiary and SSI beneficiary some extra help. Maybe that’s a little bit of extra income to buy . . . nicer things than the really bare bones Government benefits will provide.  

Well, you can’t give the beneficiary that income or those assets outright because they’ll they’ll be disqualified from their benefits. And that’s not a result you want, because for people who receive those benefits, it’s usually a big deal in their in their financial life.  

So the basic problem then is “OK how do you give a benefit recipient those extra resources without disqualifying them for benefits?” And that’s what the Supplemental Needs Trust was invented to do.  

It’s called supplemental, because the idea is it’s over and above that bare bones, government benefits level. Right. So it’s a trust to provide a little bit extra to the beneficiary benefits recipient.  

Why are SNTs Allowed?

And so as you can imagine, there’s a basic tension there, right? That usually the government wants anybody who can afford it to stay off of those benefits to preserve resources for the people who really need it. So if the government wanted to be really aggressive about that, it would say no, you can’t even have any extra, because as soon as someone wants to give something to you, it means you’ve got more– too much, above the limit.  

But the policy tension is kind of “OK, but we don’t want to discourage family members from helping their disabled loved ones” or you know, whatever the case, maybe we don’t want to discourage private charity here.  

Statutory and Legal Authority for SNTs

So the supplemental needs trust is written into the statute. There are three sections in the Revenue Code that let you make these trusts with specific requirements to make sure that they’re actually supplemental and not, You know, huge disguised gifts that would be disqualifying.  

So that’s the basic concept and the basic policy tension there. I will explain in future videos — this one’s already getting long — considerations on when to use it. Some alternatives.  

Conclusion

But the basic idea is the supplemental needs trust lets you give money, give some extra resources to a person on benefits without disqualifying them from those benefits.  

Is a Special Needs Trust the Same as a Supplemental Needs Trust?

And so if you see special needs trust, that’s another name. But I like supplemental needs trust because it emphasizes the purpose of the trust as a supplement to those benefits.  

So until next time, thanks for watching. This is Andy Stautz at Stautz Law and call me with your questions.