ascertainable standard

Home / Archive by category "ascertainable standard"
Special needs trusts…

Special needs trusts…


A special needs trust (“SNT”), sometimes referred to as a supplemental needs trust, is a trust that is used primarily to supplement, but not replace, any public benefits (like Medicaid and Supplemental Security Income (called “SSI”) that a special needs beneficiary may receive.   The three main types of SNT are the d(4)(A) disability trust, the d(4)(C) pooled trust and the third party SNT.

This article will focus on third party special needs trusts, as they are commonly used by parents planning their estate for a disabled child and their other children.

First, it is crucial that a third party SNT is drafted correctly by an experienced estate planning and/or elder law attorney.  This is because the language of these trusts is scrutinized very closely by public benefits agencies to ensure that the purpose who created the trust intended the inheritance within to be supplemental for the special needs child and not to replace or supplant public benefits.  Medicaid and SSI are both means tested benefits, i.e. you must have limited assets to qualify for them.  An individual with special needs, however, ordinarily meets this minimum asset standard because they cannot work.  And that is why they cannot directly inherit assets from a trust from their parents or other relatives such as grandparents.

Generally speaking, the trust must contain language that provides that the trustee has sole and/or absolute discretion to distribute assets from the trust on behalf of the special needs individual.  This differs from most trusts which often use the ascertainable standard of distributions, “health, education, maintenance and support” (sometimes referred to as “HEMS”).   This standard can disqualify a special needs individual from public benefits.

Knowing what a special needs trust can pay for is also crucial, as the rules regarding this are tricky and confusing.  In Missouri, expenses that can be paid for (without supplanting public benefits) are clothing, phone, cable, vehicle expenses, insurance, tuition / books, household furnishings, computers and electronics, taxes, medications and therapy and legal fees.

There are frequent and often conflicting rules changes surrounding special needs trusts.

Choosing a trustee and successor and alternate trustees is an entirely different issue and best left for another article.  However, this is also a crucial aspect of special needs planning as the complexity of these trusts requires someone who can navigate the complexities or who understands when they need to hire someone (such as Legacy Law Center) to assist them.

Legacy Law Center can assist clients in all aspects of special needs trusts, from the utilizing our expertise and experience in drafting these trusts to assisting trustees to carefully and correctly administer the trusts with the strict and every changing guidelines.