At JGB, estate planning is our primary focus. When we partner with you and your family, we take the time to fully understand your individual circumstances so we can create documents that reflect your specific goals and needs. Because every family is unique, careful and personalized planning is essential to ensuring your wishes are properly carried out. One important tool we often utilize is the Special Needs Trust (SNT). This article will introduce you to SNTs and highlight how they can be an essential component in providing for your beneficiaries.
Understanding Special Needs Trusts
A Special Needs Trust (SNT) is a critical estate planning tool designed to provide financial support for individuals with disabilities while preserving their eligibility for essential government benefits such as Supplemental Security Income (SSI) and Medicaid. Because these programs impose strict limits on income and assets, receiving funds outright through a gift, settlement, or inheritance can unintentionally disqualify a beneficiary from receiving assistance.
How a Special Needs Trust Works
An SNT places assets into a trust managed by a designated trustee. Because the beneficiary does not directly control the funds, the assets are not counted toward eligibility thresholds. The trustee administers the trust and makes distributions that supplement, rather than replace, government benefits, allowing the beneficiary to maintain support while improving their quality of life.
Permitted Uses of Trust Funds
Trust funds may be used for expenses not typically covered by public benefits, including specialized medical care, therapy, education, transportation, assistive technology, and recreational activities. These distributions enhance the beneficiary’s independence, comfort, and overall well-being.
A Practical Example
Consider a parent who wants to leave an inheritance to an adult child with disabilities. Leaving assets directly to the child could jeopardize eligibility for SSI or Medicaid. Instead, directing those funds into a Special Needs Trust allows a trustee to manage and distribute the assets for supplemental needs, such as a wheelchair-accessible vehicle or additional care, without risking benefit eligibility
Types of Special Needs Trusts
There are two primary types of SNTs. A first-party trust is funded with the beneficiary’s own assets and may include a Medicaid payback provision. A third-party trust is funded by family members or others and allows any remaining assets to pass to other beneficiaries.
The Bottom Line
By utilizing a Special Needs Trust, our beneficiaries can keep their benefits and not have to spend down their inheritance for medical care that would otherwise be covered through public assistance programs. It’s a great way to protect their inheritance and allow them to have additional funds to cover things that fall outside of public assistance programs. If you would like to discuss this specific type of planning or anything else related to your estate plan, please give us a call.
About the Author
Jim has been practicing law in Virginia for thirty years with his practice based primarily in the Richmond and Charlottesville areas. He has represented clients throughout the Commonwealth at both the trial and appellate levels. In addition to his extensive trial work, he has assisted clients with their estate planning needs through both will-based and trust-based plans. His interest in estate planning grew over his years in practice and eventually lead him to dedicating his entire practice to trusts and estate work. He has witnessed first-hand the pitfalls of inadequate planning within his own extended family and wants to ensure that his clients are taking the right steps to secure their legacy.
Jim is a graduate of the College of William & Mary where he was a philosophy major and played on the tennis team. He is a life-long racquet sports enthusiast as a player, instructor and coach. He has held state rankings in both tennis and squash and is very active in those communities in the Richmond area.
Prior to practicing law, Jim worked in the financial services and insurance industry helping clients to develop retirement plans to address their long-term financial security. He lives in Henrico County where he and his wife Angie have raised their three children. Outside of work, Jim enjoys spending time with his family, playing tennis and squash or hammering out some music on the drums, guitar and bass.