Why It’s So Important To Have An SNT For Your Special Needs Child

Special Needs Trust or Supplemental Needs Trust is a type of trust that enables the holding of assets that are meant for a disabled or special needs child or adult, without causing them to become unentitled to receive governmental benefits.

Why You Must Have A Special Needs Trust

When you die, all assets are automatically passed to your spouse and children, which also includes the special needs child. If you’re not married and you die, all assets become your children’s assets (also including the special needs child). Remember, these assets are counted by Medicaid and SSI, which have financial eligibility limits on them, as countable income.  If your child receives assets that Medicaid deems as countable income and it pushes them beyond this limit, he/she may have to pay for his/her own medical care.

Simply put: without an SNT, the assets you left for your child are used toward medical expenses and other things; something that would have been paid for by the government… for free.  Of course, once the assets are gone, the child can begin receiving Medicaid once more.

You can avoid this scenario with an SNT.  According to the government, an SNT will hold onto the assets without interfering with the benefits he/she is getting from the government. Thus, the special needs child can have both the assets and governmental benefits.

4 Ways Assets Are Passed On To Surviving Family

It doesn’t matter if you have a Will or not, if you don’t correctly put in an SNT, your assets will go onto your special needs child and be considered countable income by Medicaid, rendering them ineligible for the program. There are several ways that your asses can pass outside a trust or will to your special needs child:

1 – Beneficiary on a life insurance policy
2 – In-trust for account
3 – Payable-on-death stipulation
4 – Improperly written trust or Will

When Should You Get An SNT

SNTs must be drafted while you are alive, either through an inter vivos trust agreement or a testamentary trust in a Will.

Several Mistakes People End Up Making In The SNT Planning

1 – Disinheritance

Many parents think by disinheriting their special needs child that it does more good than harm. And, it can work! However, it leaves them vulnerable. After all, your other children may leave for college, begin their own careers, have their own families, etc. Your most vulnerable child – the special needs child – may not get to experience these things and need the additional help the SNT can provide.

2 – Relying On Siblings

Another mistake parents make is the relying of their “normal” children to care for their special needs sibling. Keep in mind that assets left to children are subjected to the problems a child could have: judgments, divorces, financial and personal problems, disability, illness and death. Your intentions might be good; but, your child’s situation can be different from what you had envisioned. Your special needs child is vulnerable if left to the impulses of their siblings’ life.

3 – Inadequate Funding Of A Trust

Another common mistake parents make is not funding the trust. If your assets go to someplace other than the trust, what good is it? You need to know where your assets are going to go upon the event of your death.  How does your Will leave assets? What is the life insurance policy like? What about savings bonds, retirement accounts, etc.? Many of these will send assets to the SNT.

4 – Not Providing For The Special Needs Child’s Privacy

Bear in mind that the inter-Vivos trust is a private document and the terms don’t need to be known by anyone who is not involved in the circumstances. On the other hand, Wills are deemed public record and can be accessed by anyone – family member or stranger.

Should You Put Together An Inter Vivos SNT

When you have an inter vivos SNT, it goes into effect right away.  There are instances where the probate can take time, is delayed and sometimes contested. With an inter vivos SNT, the money goes right into the plan and can be accessed for your special needs child immediately. Thus, it eliminates any wait that could occur.

When you have an SNT for your special needs child, you thwart the possibility of them being denied government benefits. An SNT ensures that they can have both at the same time.