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Special needs trusts: protecting government benefit eligibility

On Behalf of | Jun 20, 2024 | Probate and Trust Administration

When developing a care plan for someone with special needs or a disability, caregivers often establish a Special Needs Trust (SNT) to manage financial resources for a beneficiary. Through proper planning, caregivers ensure continued care and eligibility for government benefits. 

Identifying types of SNTs

Oklahoma has different types of SNTs to consider:

  • Beneficiaries establish a first-party SNT with their assets, often through inheritance or a personal injury settlement.
  • Someone other than the beneficiary, typically a family member, establishes a third-party SNT.

There is also a pooled SNT. This is where a nonprofit manages assets for a beneficiary.

General responsibilities of SNTs

An SNT ensures responsible protection of the beneficiary’s quality of life. Create an SNT solely for the beneficiary’s use. Use assets in their best interests. Use funds for purchases that enhance their quality of life, not for expenses covered by benefits like SSI or Medicaid.

The trust administration oversees a trust. The sole benefit rule ensures adherence to legal standards regarding the use of trust funds. You can spend funds in the approved manner to supplement, not replace, government benefits.

Financial planning for SNTs

Address the beneficiary’s long-term financial needs. Understand that income limits for gifts or inheritances can impact government benefits like SSI or Medicaid. Consider a life insurance policy that designates the SNT as the beneficiary. This ensures that funds support the beneficiary if the caregiver dies.

Attorneys can help with budgeting, estate, and tax planning. They can ensure the SNT aligns with Oklahoma state and federal laws. This alignment helps achieve long-term financial goals. Effective management ensures that the SNT provides financial support and eligibility for government benefits.

These financial planning strategies utilize an SNT to its full potential and secure a beneficiary’s financial future.