Individuals establish special needs trusts (SNTs) to protect assets intended to supplement means-tested government benefits for a sole beneficiary, and to preserve the individual’s eligibility for such programs. SNTs exist in the form of first party, first party pooled, third party, and third party pooled trusts. First party and first party pooled trusts hold assets belonging to the beneficiary. Third party SNTs hold the assets of anyone but the beneficiary. Pooled trusts are administered by a nonprofit that combines multiple sub-accounts for investment and management efficiency, while standalone trusts are handled by a selected trustee. It’s critical to understand the funding of an SNT when contemplating termination.
Once established, SNTs may terminate either with the death of the primary beneficiary or in the event of specific circumstances. For example, an SNT may terminate during the lifetime of the beneficiary when one or more of the following conditions exist:
- a change in law or eligibility for benefits;
- improvements in ability to engage in sustainable gainful activity so that beneficiary no longer meets disability criteria;
- SNT no longer holds funds sufficient to justify the costs of administration.
Each SNT must contain well drafted terms detailing the complicated process of dissolution.
SNT Termination Upon Death
When the beneficiary passes away, the trustee must pay final expenses and taxes and satisfy liens against the SNT before the trustee makes distributions to remaining beneficiaries. In the case of first party SNTs and first party pooled SNTs, the trustee must reimburse state Medicaid for services rendered throughout the individual’s life. In stark contrast, the law does not subject a third party SNT to a Medicaid lien upon termination. The order in which the trustee satisfies the various obligations differs by state law governing Medicaid. In situations requiring satisfaction of a Medicaid lien, the trustee should request a listing of expenditures from the Medicaid agency in each state that provided services to the beneficiary and follow the precise process for managing the reimbursement to the Medicaid programs of the state(s) involved.
Remainder Distributions
In SNTs holding assets other than cash, it may take considerable time to satisfy these liens. However, once complete, there may be considerable funds remaining. In those instances where the SNT exists under court supervision, the trustee must draw up a final account and obtain court approval before making further distributions. Notably, many pooled trusts require that assets left in a sub-account be retained by the umbrella trust to cover administrative costs. In contrast, standalone SNTs name residual beneficiaries–individuals, classes of beneficiaries (surviving siblings, for example) or charities to receive remaining funds. The precise process differs depending on the type of residual beneficiaries designated. In some cases, identifying and locating unnamed beneficiaries may take additional time and resources. In addition, if any of the residual beneficiaries include minors or individuals with disabilities, trust language may arrange for the trustee to continue managing the funds for their benefit in a new trust.
Terminating SNTs Prior to Death
But what if facts and circumstances support the termination of the SNT prior to the beneficiary’s death? Government regulations require that the decision to close the trust must be made by someone other than the beneficiary and that termination benefits no one other than the beneficiary. Facts and circumstances may support the continuation of the SNT, even if the beneficiary no longer receives, or remains eligible for, public benefits. For example, the beneficiary may require assistance in managing finances, or it may be wise to protect those assets from creditors. If terminating the trust is the best course of action, final expenses, taxes and Medicaid liens must be satisfied prior to distributing the remaining assets to the beneficiary.
SNTs provide a significant benefit to the beneficiary and support an excellent public policy of providing for individuals with disabilities, but the termination of the SNT can be complicated. To avoid violation of law and trustee liability, consultation with a special needs attorney remains the best way to ensure the process goes smoothly.
About this Article: We hope you find this article informative, but it is not legal advice. You should consult your own attorney, who can review your specific situation and account for variations in state law and local practices. Laws and regulations are constantly changing, so the longer it has been since an article was written, the greater the likelihood that the article might be out of date. SNA members focus on this complex, evolving area of law. To locate a member in your state, visit Find an Attorney.
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My SNT was revoked by 2 siblings when my father passed and mother had severe dementia. It was a 6 million dollar family trust in 2009 and now my siblings tell me “there’s no money left” yet multiple properties have been sold and my SNT was never funded.
You should contact an attorney about that.
Can u help me I have a irravicable special needs trust the lawyer tells me I can move. The only way I am doing anything with get it moved is if the bank sing off on it. I think this is stupid. As mush as my boyfriend is for boyfriend is to pay rent. Pluss it’s a small town and everyone and u can’t get no were. I want this trust thang to me gone it is killing our life the bank went through my underwear drawer and told me to fold tolws in the closet. I jest want my home and to have my family what do I do.
I have so many questions. I am wondering if a minor who has a snt set up by the courts from a malpractice lawsuit will be able to stop it when they become an adult. I also do not understand what happens when a child doesn’t qualify for benefits from SSI because parents income is over the income brackets? Is there someone or a company who can answer questions directly besides Lawyers?
There are many banks and trust companies who handle Special Needs Trusts and may be a good resource for you if you are looking for non-legal advice. I am a Trust Officer with American National Bank and specialize in Special Needs Trusts. I would be happy to speak with you regarding your questions, but depending on your end goals you may indeed need legal counsel.
I am a 68 year old female from NYC.
I’ve had a an the SNT since 2005. The funds are
down to about $200. No longer use it. Been receiving Medicaid service since 1990. Doctor visits and
medications. I no longer care to have medicaif.
But I will have Medicare and advantage,
But I wondering if I inherit money will I have to pay
back Medicaid? Or will they try and take my money?
I am a 59 year single female and I need some answers. I worked 25 yrs in Dentistry when I became physically disabled and received SSDI in 2010. Why would I need a trust like this set up? It seems my mother her new husband set up a trust for her/his adult children and “robbed” us of our properties, I never signed anything! I have no rights, no information, and am living “extremely low-income”, unable to pay for a doctor visit and the deed to my modest home I had paid for from working all my life, was in my diseased father’s safe along with the title to my car purchased with $44,000 back-pay which was “stolen” from me! How do I get some info about this so-called special needs trust? I am isolated, and without anyone to tend to my so-called “special needs”! My mother lives in a mansion and who I thought was just a dumb acquaintance in the village I have been forced to live in due to lack of funds or deed to my home may have appointed herself a “guardian”, driving a brand-new mercedes benz and slandering my name and sabotaging any relationships I had! I am not the only one! How can this happen to normal, hard-working adults like my step-brother, my diseased step-sister, my brother whom I suspect is dead too and (what goes around comes around) now dead stepfather, her partner in crime of stealing benefits to line their own pockets! It is a shame for these criminals to take advantage of this “Special Needs Alliance” with parents that truly set up these trusts to protect the future of their disabled children! I cannot even afford medical attention! I never applied for SSI, food stamps and I suspect my home is under Section 8 HUD! I had to pay my Medi-Care premium for 2 months and did all the paper-work & spent the day at Human Resources to have that paid for & was eagerly awaiting due to receiving official papers from SS for re-imbursement of my “chump-change” while I did without food! Well, someone due to fraud & forgery received that too! Any suggestions on getting to the bottom of this rabbit hole? I was so sick, had surgery, even had hospice for a month and no transportation! I was a well-adjusted, attractive, social & professional woman (still am, chuckle) and my life, career, finances,family, home and a future were stolen from me by my mother who I trusted! Desperate & distressed in New Mexico the “land of entrapment”! I had lived & worked in Houston Tx for 16 years until I was “entrapped” by my mother to feed her never-ending, never-enough greed and control…Sad state of affairs
I’m sorry I think you should reapply for SSDI SSDI if you are already receiving it you can tell them your circumstances and there is a thing called abuse of a disabled person that you can sue them for you can have almost everything except for their primary dwelling
I’m the trustee for a friend’s special needs trust. I’m no longer able to continue working in that function. How can I terminate my position?
There’s a way you can do it I want is to turn it over to a bank, you could ask the beneficiary if they have someone that would be a guardian or also fill the place for a trustee I believe
My brother and I were left money (stocks) in a SNT. I am physically disabled and my brother had some mental issues, so he was considered mentally disabled. Recently he lost his SSDI and health benefits because Social Security deemed him no longer disabled and removed his benefits. So, since he is no longer considered disabled and no longer receiving Social Security payments, is he still bound by the rules and restrictions of the SNT or can he demand the right to take control over his stocks from the trustee?
I administer a SNT for a family member. In my little bit of understanding SNT’s, I believe once you no longer receive any SSDI or any governmental support (as a reminder, it’s not ONLY SSDI or SDI or even Medicare or if in CA, Medi-Cal that prevent a person from receiving their full inheritance and ability to control their money themselves, there are other circumstances also, so it’s not a simple thing. There are many rules that are to be followed), you may have the trust dissolved and receive your money. I recommend that he not “demand” but instead speak with his trustee. Most trustees are honest people trying to help the beneficiary. Since he no longer receives any help from the government, he will need to show proof of this fact to his trustee. Once he sends a copy of any proof, if the trustee balks at helping to get him the remainder of his inheritance, I would recommend finding an attorney. Also, the beneficiary can legally remove a trustee, however the beneficiary CANNOT appoint a replacement trustee. But the trustee can help find him another. If by doing this he has another trustee willing to help him dissolve the trust, that might be a way to go also.
I have a special needs trust with trustees who are not for my benefit but yet I still have SSI and Medicaid I want to get my Special Needs Trust to where I have full access to all of what is in it it is several dollars that will take care of me forever especially the way they’re invested in stocks and whatnot now I could use half of it and be set for life while the other half still gains interest but is there for my disposal at any given time but I don’t want to lose my benefits until the trust is given to me solely I have an attorney who keeps trying to tell me that it can be mine now he’s thinking about being my guardian I think if he’s my guardian and then we revoke the trust somehow even though it’s supposedly irrevocable I would be way happier because then I’m not limited to any amount of money and I would use some of the money to get Blue Cross or Shield Shield, which I think is the regular way to take care of yourself in the later years in case you need it, does anybody have any information on having a special needs trucks and trustees and later having the trust no longer a Special Needs Trust and all of what is entitled to you go to you will you please answer thank you my name is Todd
Hello,
my name is James i have one simple question that seem never been answer after consulting with many attorney, they explain that is unusual to terminate a SNT while the person is still alive regarding with special need need trust. so The question i have is, can i terminated a special need trust with medicaid buy back while with out medicaid coming after the trust? i do not want to terminated the trust and get a bill from medicaid saying that i have to pay them back… back then i was sick but now a lot of circumstance have changed and i became more functional and been seeking to terminate the trust but my only concerned is that if i pursuit this road, i need to know that if medicaid will come after the trust? it state that i would have to pay them upon on death of Beneficiary (me),
so the question is, will medicaid come after the trust if i terminated the trust if the beneficiary (me) still alive?
I had two schizophrenic brothers, my parents set up a trust for them and I am the trustee. To make sure each brother had enough money to assist them I made each other’s trust the primary beneficiary of the other’s trust. When my older brother died 3 years ago I forgot to remove his trust as primary beneficiary of the younger brother’s trust. The younger brother passed away 12/23/17. The primary beneficiary of his remaining assets is the older’s brother’s trust. I don’t have a copy of that trust anymore and cannot find anyone who does. I am being told that I have to have that trust dissolved before the remaining assets can be received by the contingent beneficiaries who are myself and two other siblings. How do I dissolve a trust that I have no documentation on?
All you have to do is prove that the trust is in existence and they aren’t with their death certificates and I’m pretty sure they will help you walk your remaining benefits to you whoever is in need of whatever is there as a family would do for itself and guide others with their own assets to the proper parties who they belong to don’t sign anything if it doesn’t have exactly what you want
Upon the death of the beneficiary of a 3rd party SNT do the assets get a step-up in cost basis for the residual beneficiaries?
Hi, I had SNT trust made 2 years ago. It was suppose to be a 3rd party Trust. Social Security said it is written like a 1st party trust. They have again stopped my daughters SSI until it is corrected. They suggested I take it to court and have it cancelled. It was drawn up by an attorney who supposedly knew how to write this. Multiple attempts to have this corrected. The Trust says irrevocable. Can I take This to court and have it cancelled? And which court would I go to. I’m so passed frustrated!!! Any real help would be greatly appreciated.
I have a special needs trust. My trustee is a sibling. I’ve lost alot of money in poor investments. They have had me evicted twice, lost a house, been homeless twice. I’m agoraphobic. I’m home bound and need to speak with my Drs online instead. They refuse to answer us about a service dog and laptop. It’s rare i get anything unless they are covering up a mistake. They’ve Hired contractors that took the money and didn’t come back and they didn’t do anything I’m now in a home I can’t afford because they didn’t do my budget correctly. . the trust is supposed to pay the balance of my medication they don’t so I would have a bill. I I’ve never been able to receive a copy of the trust and I have no idea the amountt in there I’m told several different things by the attorney who I thought was my attorney and it’s a mess that I’m told if I contact an attorney that they will terminate my trust
I am not sure if anyone is still answering questions on this site. Hopefully you are. I have just viewed the will my father put together, and am a bit livid about a restricted SNT that is to be formed for me. In addition he has put the first person to handle the trust in the hands of someone who has a very negative view of me. The second person in line to handle the trust should the first person not be able to is my ex husband. Here are the facts. I am in my 50s and have a disability (I have a mood disorder). Sometimes I work, sometimes I don’t, and over the years I have had a number of spinal surgeries that now prevent me from handling any hard labor, long standing etc. I manage my own bills, bank account, and I am not incapable of handling financial issues. My disability income is way over the 750 limit to be eligible for SSI or Medicaid. I only have medicare, and I pay my own medical bills as they come up. I do not have any major creditors after me either, no judgments. The thought that I would have to go to either of the people listed to handle the trust and ask or even beg for money and be monitored or restricted has me mortified and angry at the thought. If should my father pass away, can I prevent this SNT from being formed to begin with in court? If yes, what are my options? I do have a brother and a nephew who are also inheriting money, but they have a heritage trust set up for them. My brother is also disabled, in fact he is mentally incapable of managing a bank account, balancing it without help from someone, and has impulse control issues. So I am perplexed why a restrictive SNT is set up for me and not also for him. Anyway, I am not sure if you can “disclaim” an SNT in Texas, but if there is anyway to go before the probate judge and ask that this not be formed, I sure would appreciate an answer on this.
Is it possible to have a special needs trust that determines what they will and won’t let you buy with your money?? If my trust is to get disbursed and funds are released how long does that usually take and what other trust can I set up for the remainder of my funds to still receive tax benefits so they won’t take half of my check in taxes come filing next year? Inner a trust that allows me to spend and buy whatever I want and not tell me what I can and cannot do and that still gives intresr or at best tax benefits.
My situation is this I made a mistake with a certain amount of money between $10,000 $12,000 on my credit card spending over 30 years ago and my late mother reimbursed the credit card company for the full amount.
After that time she went to a elder law attorney set up a third party SNT in my name and it has been a living hell ever since! Yes I was undisciplined with finances but I was much younger then and not nearly as more experienced and mature as I am now! I am also experienced fundraiser/grant writer for a well known non-profit organization and have successfully raised almost $20,000 over a 10 year period!
My disability (by the way I have a hidden disability) is fully and totally controlled and I have lived a very active and independent life style. I also have a Associates, Bachelor’s degrees and some graduate level course work under my belt!
I have more than 15 years of work experience in the public sector, including several years of legislative experience, as well!!!!
So if I can be a successful fundraiser for a local nonprofit organization does this not demonstrate the knowledge, skills, and capabilities I would need to run my own personal finances?
Would I be able to contest or terminate this SNT here in Albany County in upstate New York. Basically this SNT has been nothing but 21ST century slavery and I WANT TO
“WRIGHT THE WRONG!”
If the grantor/initial trustee of a special needs trust leaves a relatively small amount of money from a life insurance policy when she dies, could the successor trustee and/or other friends and relatives add to it now and then when the balance gets low?
I have a snt for my brother that is not a Medicaid trust. I have been advised to dissolve the trust so that we can set up an annuity with Medicaid. What is the best way to dissolve the trust. It is set up with Morgan Stanley. There is a provision in the trust that authorizes the trustee to terminate the trust in the event it excludes eligibility for assistance programs such as Medicaid.
Thanks for your help
How do I find answers to some questions I have regarding a special needs trust of which I and my 2 children are trustees and beneficiaries of. The beneficiaries are the 3 of us as well after this disabled person passes. After my friend died I was paying lawyers for 3 years and I did much of the foot work. If I can avoid an attorney & their fees I would be most interested.
Thank you.
What is the dollar amount where a SNT can be terminated?
The SNT we have our son’s money in, is sucking the rest of it up monthly, and we want something to be left for the poor kid.
I have a special needs trust which I never wanted and have trying to get out of for 2 years it does fit my with my life I need to bury my mother ashes and have no other money to do it how can I stop this trust it has mess up my life big time I just want to give this money away to get rid of it I want it its a nightmare
All questions pertain to a SNT in California.
1)What rights does the beneficiary have to review the financial accounting of the trust? (i.e.Can they request statements?, etc)
2) What recourse does one have if a SNT was set up for some who thought the beneficiary had SSI not SSDI and the beneficiary doesn’t need the protection of the trust however the trust is in the process of being distributed and it is now irrevocable?