A Special Needs Trust (SNT) is a trust designed to preserve needs-based benefits. Many government benefits, like SSI and MediCal, are needs-based, meaning you must demonstrate a high level of need, or in other words, be functioning at a level of poverty. If you are receiving needs-based benefits and you inherit money, you will lose your benefits.

There are two kinds of SNTs - first party and third party. First Party SNTs are funded with the disabled person’s assets. They often occur with a personal injury settlement where the injured party has been rendered disabled and qualified for government benefits and then receives compensation. First party SNTs are a little different, and more complicated, than Third Party SNTs, which is what we are talking about here.

With a Third Party SNT, anyone can be the trustee, so long as it is not the beneficiary of the trust. The trustee has total and absolute discretion about making distributions from the trust, although the trustee cannot disburse funds that would be duplicative of what the government benefits provide.

SNTs can be used to provide in kind support and maintenance, like buying things for the disabled individual.

At Balamuth Law, we include SNTs in all our trusts as a “just-in-case” provision. We use them just in case one of your heirs is disabled at the time they would inherit. You wouldn’t want the inheritance you leave them to result in them losing their benefits. That’s why we include SNTs.

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