A self-settled special needs trust (SNT) is often considered to preserve public benefits for individuals receiving personal injury settlements. However, this may not always be the optimal choice.
Disadvantages of Self-Settled SNTs:
- Medicaid Payback: Upon the beneficiary’s death, remaining trust assets must reimburse Medicaid for services provided.
- Strict Oversight: State Medicaid agencies may closely monitor trust distributions.
- Distribution Conflicts: Disagreements can arise between the trustee and beneficiary regarding appropriate use of funds.
- Sole Benefit Rule: Trust assets must exclusively benefit the beneficiary; other family members cannot benefit.
- Age Restrictions: The beneficiary must be under 65 when the trust is established.
Alternative Options:
- Settlement Protection Trust: This support trust allows for broader distributions under a health, education, maintenance, and support (HEMS) standard, enhancing quality of life. However, it may result in the loss of public benefits.
- Settlement Protection Trust with Special Needs Provisions: Combines features of both trusts, offering flexibility while maintaining some benefit eligibility.
It’s crucial to consult with a special needs planning attorney to evaluate these options based on individual circumstances and goals.