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New Law for Establishing a Special Needs Trust

By Swogger Bruce & Millar, Apr 10 2017 02:56PM

On December 13, 2016, President Obama signed the 21st Century Cures Act. One section of the law made an important change to estate planning for disabled individuals. In the past, a disabled individual could not establish their special needs trust. It would need to be established by a family member, guardian or court order. Courts in Northern Michigan are very helpful in establishing these trusts, but the process takes time, effort and money. Now a disabled individual, who is competent, can sign and establish his trust without having to rely on others.

Special needs trusts are often used to provide a disabled beneficiary with assets to improve his lifestyle without those assets counting against eligibility for most government benefits. The new law applies to first-party special needs trusts which are also known as Medicaid payback trusts. Assets belonging to the disabled individual are placed in a trust and become excluded for purposes of applying for government benefits. Because the assets belonged to the individual, there must be a provision that provides that at the disabled beneficiary’s death any state that provided Medicaid must be paid back before distributing the remainder to a beneficiary’s heirs.

The two most common times to establish a first party special needs trust: (1) receiving an inheritance or (2) receiving an award from a lawsuit. We recently had two special needs trusts approved by the Benzie County Probate Court for two gentlemen who received criminal restitution.

Third-party special needs trusts are established as part of a family member’s estate plan. The provisions are similar, but because the assets never technically belonged to the beneficiary there do not have to be any Medicaid payback provisions. A third-party special needs trust allows a better result than receiving an inheritance and then putting it into a Medicaid payback trust.

If you have a disabled child or grandchild, a third-party special needs trust can improve his quality of life without causing him to lose government benefits. If you have received an inheritance or an award from a personal injury lawsuit, a first-party special needs trust can protect the benefits you are already receiving.

Oct 2 2018 04:42AM by Beatrice Morgan

This article was very helpful, but What would be the approximate cost of setting up a third party SNT,
it is not a large estate or liquid assets approximately 21,000. combined.

Oct 2 2018 01:09PM by swoggerbru85006182

A stand-alone special needs trust usually starts at $1,500. If you have or are thinking about getting a revocable living trust, special needs provisions can be added to that document without adding much to the cost. We always recommend taking advantage of our free consultation so your specific situation can be discussed in more detail.

Thank you for posting.

Nov 25 2018 01:07AM by Erica

I am disabled and live in TN. My father set up a irrevocable Special Needs Trust. My trustee was my mother but she passed away last week. My companion of 22 years is going to be the new trustee. We want to move back to MI. He is a veteran and is getting a VA loan. For me to be on the title, I have to pay $12,500 for a downpayment. The house will be around 100k. Will this harm my benefits and if I die, does the house go to the state? There are 2 beneficiaries if I die. Thankyou

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