Are you the parent or guardian of someone with a serious mental or physical disability that’s not expected to significantly improve? You want to protect their interests both while you’re able to care for them and after you’re gone.
That’s where SNTs or special needs trusts (sometimes called supplemental needs trusts) come in. These trusts allow your loved one to qualify for government-sponsored programs like Medicaid and Social Security Income (SSI) that cover necessities while still being able to benefit from whatever you’re able to provide for them, or whatever their own assets can provide, to have the most comfortable possible life. This might include caregivers, specially equipped vehicles, home accessibility remodeling and other things these programs don’t cover.
Because these programs are means-tested, they could lose their benefits if these other assets and later inheritances are included. They are the beneficiary of an SNT, but the assets aren’t legally theirs.
Third-party SNTs
A third-party SNT is the most common. The third party is typically the parent or guardian who establishes the trust. They’re generally also the trustee, with the disabled person being the beneficiary. Assets in the trust can be withdrawn by the trustee, but they must be used for the beneficiary.
It’s important to note that Medicaid and SSI don’t require repayment of the benefits provided to a disabled person who has a third-party SNT when the beneficiary dies. That’s one reason why these are more popular than first-party SNTs. However, sometimes, first-party trusts need to be established.
First-party SNTs
These are funded with the beneficiary’s own money. They’re typically set up when a person receives a large settlement or reward ordered by the court after some type of personal injury suit. This is the case when, for example, someone became severely disabled in a serious car crash caused by another driver or an accident caused by malfunctioning equipment at an amusement park.
The beneficiary of a first-party SNT is not disqualified from receiving government benefits while they’re alive. However, unlike with a third-party trust, these benefits must be repaid after the beneficiary dies.
Regardless of which type you establish, you’ll want to name a successor trustee to take over after you die or if you become unable to manage the trust. That successor trustee may or may not be the person you choose to become their guardian.
There’s a lot more to understand about SNTs in Kentucky. How you establish one will depend on your and your loved one’s unique situation. Having experienced legal guidance is crucial.