Supplemental Needs Trust FAQs

Q. What is the Supplemental Needs Trust?

A supplemental Needs Trust (SNT) is a Trust authorized by federal and state statutes specifically for a “disabled” beneficiary who is receiving or eligible for means tested public benefits.

Q. What is a Trust?

A Trust is an agreement involving three parties, Grantor, Beneficiary and Trustee. The Grantor creates and funds the Trust with his or her assets, which are then owned and managed by the Trustee in a fiduciary capacity for the benefit of the Beneficiary.

Q. What does it mean that a SNT is a Statutory Trust?

SNTs are specifically defined and permitted by laws adopted by Congress and the New York Legislature. These laws place certain restrictions and requirements on what must be included in the Trust document that are different from non-statutory trusts.

Q. Who is a Disabled Beneficiary?

For purposes of an SNT, a Disabled Beneficiary is a person who meets the Social Security requirements for being disabled. To be a candidate for a SNT the person must be disabled, and should require means tested public benefits such as Medicaid and SSI. (If the person is receiving Social Security disability benefits, then he or she will qualify as a beneficiary for a SNT.)

Q. Why does a Disabled Beneficiary who is receiving means tested public benefits need a SNT?

If money comes directly into the hands of a disabled beneficiary who is receiving means tested public benefits, he or she will lost those benefits, i.e they will “supplant” their public benefits. If the fund are in SNT, they will not supplant their benefits, but will be available supplement the needs of beneficiary.

Q. What kinds of SNTs are there?

There are First Party SNTs, including Pooled SNTs, and Third Party SNTs.

Q. What is a First Party SNT?

A First Party SNT is one where the Grantor is also Beneficiary. For example, when a disabled person receiving means tested public benefits receives and inheritance or personal injury award, he or she can create a SNT for those monies, and still remain eligible for public benefits.

Q. Are there any special rules regarding First Party SNTs?

Yes. For one thing, the SNT must be created by a parent, a grandparent or legal guardian of the beneficiary (even though the funds belong to a beneficiary). Also, the SNT must provide that Medicaid be paid back on the death of the beneficiary for a any benefits paid by Medicaid on behalf of the beneficiary.

Q. What is a Pooled Trust?

A Pooled Trust is like a First Party SNT in that it is funded by monies of the disabled beneficiary. However, the Trust already exists and is managed by a not-for-profit who acts as a Trustee. Any funds remaining in the beneficiary’s account at death will stay with the Pooled Trust for the benefit of the other disabled beneficiaries who are participants, or, if they are not retained, will have to be paid back to Medicaid as with a First Party SNT.

Q. What is a Third Party SNT?

A Third Party SNT is one where the Grantor is not the beneficiary. Usually it is a parent, grandparent or the other family or friend of the beneficiary who wants to make a gift or bequest to the beneficiary. Because an outright gift to the beneficiary will adversely affect the beneficiary’s receipt of public benefits, the Grantor creates a third party SNT.

Q. How is a Third party SNT created?

A Third Party SNT is created using either a Living Trust or through the Last Will and Testament of the Grantor.

Q. How does a Third Party SNT differ from a First Party or Pooled SNT?

The Grantor of a Third Party SNT can direct where any finds that are not used for the beneficiary will pass on the beneficiary’s death. There is no requirement that the funds be used to repay Medicaid.

Q. Who should be Trustee of a SNT?

Any Trustee should have financial management ability and understand what it means to be a fiduciary. Additionally, a SNT Trustee should understand the needs of his or her Beneficiary, and the parameters of what constitute of proper use of the funds.