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Giving A Gift into A Special Needs Trust

Robin Burner Daleo • Jan 22, 2024

Question:

My son who is disabled and collects SSI has an existing Special Needs Trust. My parents would like to give him a gift, can I deposit the money into that trust?

Answer:

That depends. Special Needs Trusts, also know as Supplemental Needs Trusts (SNT) are trusts that protect a disabled individuals own income and assets. Additionally, these types of trusts can allow a disabled individual to receive an inheritance, gift or personal injury settlement while still ensuring that any need based government benefits such as SSI or Medicaid will not be jeopardized. These trust play in integral part in ensuring that the individual remains on government benefits and the monies in the trust are used to supplemental his or her life.

These trusts come in many different forms. For starters it is important to understand whether the trust that your son has is considered a First Party SNT (self-settled) or a Third Party SNT. The most basic distinction is that First Party SNT’s are funded with money that belongs to the disabled individual, in other words funded by the first party. Some examples of money properly deposited into a first party trust would be income earned by the disabled individual or a personal injury award paid out to them. A third-party trust on the other hand would be used in the case of a bequest or inheritance or a life time gift. Here we have money that was never in “the hands of” the disabled individual and therefore is considered third party money appropriately funded into a Third Party SNT. Among the most important distinction in these trusts is how the use of the assets are scrutinized during the lifetime of the disabled individual and then how the money is treated after the disabled individual passes away. In order to maintain the protection afforded by the SNT it is important to ensure that monies are used only for the disabled person and in accordance with all regulations. With a Third Party SNT the creator or grantor can direct where any remaining assets go at the time of the individual’s passing, this is not the case with a First Party SNT. First Party SNT’s require a payback provision that on the termination of the trust, typically triggered by the death of the disabled beneficiary, the trustee shall reimburse the state Medicaid agency for benefits paid to the beneficiary during the existence of the trust. This is the primary reason that it is important to know what type of existing trust you are depositing money into before you make that deposit. Inadvertently depositing third party money into a self-settled trust could create a scenario where a payback is required on monies that should have been protected from that requirement.

To best understand the type of Trust your son has and the requirements, you should consult an attorney in your area that specializes in Supplemental Needs Trust. The body content of your post goes here. To edit this text, click on it and delete this default text and start typing your own or paste your own from a different source.

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May is National Elder Law Month

by Robin Burner Daleo • 03 May, 2024

May is National Elder Law Month, for that reason we have decided to switch from our normal format and answer a question that we are oftentimes asked in our practice, “What is an Elder Law Attorney and why do I need one?” Answer: Elder Law is a fairly new and unknown area of the law. As baby boomers and their parents’ age, they are living longer and oftentimes, living with chronic medical conditions. As the cost of long term care continues to spiral out of control and families struggle to meet the needs of their aging members, an experienced Elder Law attorney can help you and your family members establish an estate plan that maximizes protection of assets while ensuring that your loved one has the best care available to them should they face a health crisis. While it is always best to plan proactively, Elder Law attorneys are adept at crisis planning and oftentimes can provide a solution which can preserve assets or save taxes where others you have consulted have told you that no solution existed. Elder Law attorneys must be familiar with multiple areas of the law - contract law, estate planning, trusts and estate administration, Medicare, Medicaid, health care insurance regulations, Public Health Law, Mental Hygiene Law, the Internal Revenue Code & State and local tax issues. In each instance the issues that we deal with are fact sensitive and the clients must be willing to give us the information that we need to formulate the Elder Law plan. This in itself is oftentimes a struggle as the clientele that we deal with tends to value privacy and are oftentimes reluctant to divulge information regarding their assets and private family issues. The various disciplines that make up the Elder Law practice are in a constant state of flux. As a result, it requires the Elder Law attorney to spend a great deal of time reading current journals and cases and continuously taking legal education courses. In addition, many Elder Law attorneys meet in informal study groups to read, understand and strategize. As the facts change, there will likely be different solutions for each client. What works for one client may be totally inappropriate for another. For instance, in one day, we may see two different clients, both clients are 86 years old, own their own homes, and need long-term care. Client A has a daughter, age 55 and Client B has a niece age 55. Client A, on the eve of going into a nursing facility, is advised to transfer her home to her caretaker daughter, who lives with her and has lived with her for more than 2 years. The transfer does not make Client A ineligible for Medicaid. Client B cannot follow the same plan because her niece is not her child. There are no exceptions for transfers to caregiver nieces. Because we do not have an exempt transfer available to us for Client B I advise Client B to sell the home and advise her that even though no pre-planning has been done, we will likely be able to save more than sixty percent of her aunt’s assets by engaging in crisis planning. Remember - one size fits all – is not the rule. Your Elder Law plan is personal, fact sensitive and requires a careful review of all of the facts and circumstances. By: Robin Burner Daleo, Esq.