SUPPLEMENTAL NEEDS TRUSTS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

A Supplemental Needs Trust is an irrevocable trust established for one named beneficiary (who is a disabled person) by a third party grantor using the grantor's own assets.  The trust allows the grantor to make gifts to the beneficiary without the gifted property being counted as a resource of the beneficiary for purposes of qualification for government benefits.  This type of trust is often created by a parent or grandparent for the benefit of a disabled child or grandchild.  The trust can also be created during lifetime with only minimal funding and used as a pour-over recipient from the grantor's Will or separate revocable trust when the grantor later dies.

 

The Supplemental Needs Trust is irrevocable, so transfers to the trust should constitute completed gifts and should generally be excluded from the grantor’s taxable estate.  The trust lasts for the lifetime of the named beneficiary, after which several options are available for remainder beneficiaries.  There is no requirement that the state Medicaid agency be paid back funds on the death of the beneficiary of the trust.