Supplemental Needs Trusts

Supplemental or Special Needs Trusts (“SNTs) are frequently used to receive an inheritance or the proceeds of a personal injury litigation on behalf of an individual with a disability, in order to allow the person to qualify for Medicaid and other government benefits. The assets and income of the SNT will not be counted as available for consideration of a government program e.g. Medicaid. SNTs are intended to supplement, and not replace, government benefits.

SNTs can be

  • First party: created with the assets of the disabled beneficiary. This includes a litigation settlement or an inheritance where there was no provision made for the disabled beneficiary. The State providing Medicaid benefits will have a right to be reimbursed upon the beneficiary’s death for Medicaid benefits paid on behalf of the beneficiary. The beneficiary must be under age 65 at the time the trust is created, and the SNT must be created by a parent, grandparent legal guardian or court
  • Third party: created with the assets of a person other than the beneficiary, the beneficiary’s spouse, or someone with a legal obligation of support of the beneficiary. This includes an inheritance where the benefactor specifically created an SNT in a will or trust for the disabled beneficiary. The trust must give the trustee unfettered discretion, then the government benefit program will not count the income or principal unless the trustee makes it available to the beneficiary.