What is a Standby Supplemental Needs Trust?
One of the purposes of creating an estate plan is to provide protection of assets transferred to beneficiaries from creditors and ensure that the beneficiary receives the assets. Similarly, while you may not think of the government as a creditor, if a beneficiary is disabled and receiving government benefits, your estate plan can provide protection of the government benefit by holding assets in a Supplemental Needs Trust (SNT). But what if you don’t have any beneficiaries who are currently receiving government benefits, do you need to include a Supplemental needs trust in your estate plan?
Planning for the Future
We never know what the future will bring. An able-bodied beneficiary might suffer disabilities later in life, whether from an accident or a condition that manifests much later in life, or a descendant may be born with a disability that qualifies him or her for government benefits. If you include a standby Supplemental Needs Trust in your plan, it remains on standby until you die and is only used if a beneficiary is disabled.
Typically, when a standby SNT is included in an estate plan, the Trustee distributes assets pursuant to it only if a beneficiary meets specific criteria. Most of the time, the criteria includes currently receiving needs-based government benefits or applying for needs-based government benefits. These criteria are used because if a beneficiary is receiving needs-based government benefits, receiving an inheritance may cause the beneficiary to lose the benefits. Utilizing an SNT prevents the loss of benefits because the SNT only allows disbursements to supplement government benefit and therefore it does not interfere with government benefits.
Supplemental Needs Trust Characteristics
- The beneficiary cannot be the trustee – the trustee must be independent.
- The trustee should have the authority to make non-support distributions of the trust income on behalf of the disabled beneficiary.
- The trustee should make payments directly to the companies and / or individuals that provide goods and services to the disabled beneficiary. Payments made directly to the beneficiary may interfere with the beneficiary’s government benefits.
- The trust should include spendthrift provisions to protect the income and assets in the trust from the beneficiary’s creditors.
Contact our Georgia estate planning attorneys at Grissom Law, LLC for more information about estate plans, including standby supplement needs trusts.
Disclaimer
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