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special needs trusts


A Special Needs Trust (SNT)  (sometimes called a Supplemental Needs Trust (SNT) is a trust designed for beneficiaries who are disabled, either mentally or physically. An SNT is created to ensure that beneficiaries who are developmentally disabled or mentally ill can enjoy the use of property which is intended to be held for their benefit. 


The disabled person is the beneficiary.  The trustee is a private person, a corporate trustee, or a court appointed fiduciary.  The trustor or settlor can be a family member who wants to give the disabled person assets through inheritance, or it can be the disabled person’s conservator or guardian or the court who places those assets into the trust.

Trustee in her/his sole discretion shall pay to or apply for the benefit of the disabled person such amounts from the principal or income, up to the whole, as the trustee, in her/his sole discretion, may from time to time deem necessary or advisable for the satisfaction of the disabled person's special needs. 


The purpose of the SNT is to provide additional resources for extra care above and beyond what may be provided by private and governmental benefits, such as Medicaid, AHCCCS, and SSI.  The quality of life for the beneficiary is enhanced.  As used in a SNT, the term "special needs" refers to the requisites for maintaining the beneficiary's quality of life which is not provided by any public agency, office or department of Arizona or any other state, or the United States. "Special needs" include, but are not limited to, medical and dental expenses, essential dietary needs, shelter, clothing and equipment, programs of training, education and treatment, insurance, transportation, spending money, vacations, movies and other entertainment and other self-esteem and quality-of-life enhancing expenses.


It is written so that the beneficiary disabled person can use the property in the trust for their own benefit while still allowing the beneficiary to receive essential needs-based government benefits. These beneficiaries can still receive Medicaid, SSI, and other government benefits while their special needs trust holds assets that they may have inherited or received in a personal injury settlement or insurance proceeds.


No part of the corpus or income of this trust is to be used to supplant public assistance benefits of any county, state, federal or other governmental agency that has a legal responsibility to serve persons with disabilities which are the same or similar to those of the beneficiary.  For purposes of determining the beneficiary's eligibility for any such benefits, no part of the principal or undistributed income shall be considered available to the beneficiary.  

If  you are a parent or grandparent and are contributing to certain expenses for a disabled person such as a child or grandchild because there is no other source of income to meet that need, then those are needs that could be met after your death through a special needs trust. Parents or other family members can leave assets to the SNT for the benefit of their disabled family member without affecting the eligibility of the disabled person for government benefits.  In addition, the SNT assets are protected from creditors, and government benefits cannot be decreased because of the existence of the SNT. 


If changes in law or circumstances render the trust invalid as a special needs trust, the trust specifies that it can be terminated by the trustee and distributed to the secondary beneficiaries.


I can assist you to design a trust to maximize benefits to the disabled person. 


Reasons why a person should be a beneficiary of such a trust:


  • The disabled or ill person may lack the mental capacity to handle their financial affairs.

  • The trust is designed to avoid the beneficiary losing access to essential government benefits because they own too much property to qualify for those benefits.

  •  The purpose of a special needs trust is to provide benefits to and protect the assets of physically disabled or mentally disabled persons and still allow such person to qualify for and receive governmental health care benefits, especially long-term care and nursing home benefits under the Medicaid welfare program.


When are special needs trusts used?


            If the disabled person receives an inheritance

            If the disabled person receives a personal injury settlement

            If the disabled person receives compensation for criminal injuries


Who may run a special needs trust as the trustee?


            May be run by family members which is called a private trust

            May be run by a corporate trustee such as the trust department of a bank

            May be run by a trustee appointed by the court

The beneficiary has no control over the assets in the trust.  When the beneficiary dies, the assets are distributed to the contingent beneficiaries named by the settlor of the special needs trust.

A self-settled trust created by the disabled person where they transfer their own assets into the trust is not permissible if that person still wants to qualify for Medicaid.  Most self-settled trusts created after August 11, 1993, are countable resources for Medicaid.  However, a trust created by a third party for the benefit of a disabled individual with the third party’s own assets will not be counted against them for purposes of qualifying for Medicaid or SSI under certain conditions. 

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