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.