Stautz Law

Tag: Supplemental Needs Trust

  • Use Cases for Supplemental Needs Trusts (SNTs)

    Video

    Transcript

    (Auto-Generated)

    Good morning. It’s Andy Stautz at Stautz Law. I am back for another discussion of supplemental needs trusts. I’m recording this right on the heels of my first discussion of how supplemental needs trusts came about and what they do.  

    When Do I Need an SNT?

    Today’s topic is OK. I understand what supplemental needs trust is. When do I use one? What should I be thinking about? And obviously this is an individual determination, right? This is why you talk to an estate planning attorney. This is why you should, you know, call me for specific advice about your situation. But today I’m discussing general considerations.  

    SNT Use Case 1: Continuing Family Support

    So the most common use case for an SNT – Probably — is the situation where some family members, let’s say parents, have a disabled child who is receiving benefits. And the parents help support the disabled child with various needs over and above the government benefits while the parents are alive. So parents are living. They’re taking care of their disabled child. That situation is great and can continue indefinitely.  

    Obviously the parents resources don’t count toward the child’s resources when they’re freely given . . . (there’s a separate “deeming” rule that you need to consider) . . . but. In general. There’s no problem with the benefits recipient having too much money because the money is still the parents’, right? It’s just given from time to time as needed.  

    The parents can use discretion. They can decide for themselves, you know how much or when or what for and stay on the right side of the benefit, you know, assets, resources, income rules.  

    Problem is, the parents don’t live forever, so the parents are worried after they die, what happens to their disabled child. How can they keep going with the support they were giving? Yeah. How can they do it?  

    History of SNTs

    So. Uh. It used to be way back, like, pre-1993. Older than I am believe it or not. That there was no statutory authorization for these extra trusts. You could try to get around it, but there’s no alternative. So it was just a matter of perhaps giving an inheritance to a sibling and then saying oh sibling like, please continue taking care of your brother or sister. Lots of potential behavioral problems there, even if it worked legally.  

    When Make an SNT? Testamentary vs. Inter Vivos SNTs

    So the supplemental needs trust steps in there and says OK, well, you can. The parents can in their will create a supplemental needs trust to carry on what they were. You know that extra support they were giving their child.  

    You can create an inter vivos special needs trust and kind of have it all set up working ready to go before death, which has some advantages, obviously, in terms of, you know, probate, smooth transition, you know, continuity there. So that’s one big situation.  

    SNT Use Case 2: Personal Injury SNTs

    The other big situation is. Personal injury or workers compensation victims, plaintiffs. Uh, you know catastrophic accident where there is someone who’s been really injured. Probably then is relying on some government benefits to pay their health care costs.  

    OK, well, what about the money from a settlement? Or a workers compensation reimbursement. Can you save any of that or keep that from all being going right away to existing government-paid bills?  

    And so that’s another common place where setting up a supplemental needs trust is often used.

    Conclusion

    So we’re at 5 minutes. That’s just two use cases, and I didn’t even get into considerations. So we’re just going to have to come back for more later. But I hope you enjoyed this talk.  

    Obviously you need individual advice about your situation, so call or book online so we can talk about your situation, give you specific legal advice. That’s all for now though. Thanks. Bye. 

    Want to talk more?

    Book your initial planning meeting with Stautz Law and we’ll discuss your individual needs. No obligation.

    Book Now

  • Supplemental Needs Trusts (SNT) Basics

    Video

    Transcript

    (Auto-Generated)

    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. 

    Want to talk more?

    Book your initial planning meeting with Stautz Law and we’ll discuss your individual needs. No obligation.

    Book Now