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Self-Settled Special Needs Trust: Advantages and Disadvantages

  • Post category:Trusts
  • Reading time:2 mins read

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.

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