Michele P. Fuller, Esq., is the founder of the Michigan Law Center, PLLC and Advocacy, Inc., a non-profit organization that administers special needs and settlement trusts. She was appointed Special Assistant Attorney General and led the team architecting the Flint Water Case settlement process. Michele is currently hosting the Great Lakes Special Needs Planning Symposium, a two-day conference dedicated to enhancing the practice of special needs planners. She is the former Chair of the Elder Law and Disability Rights Section of the State Bar of Michigan. She is currently a member of the Advisory Board for the Academy of Special Needs Planners. She is the co-author of Administering the Michigan Special Needs Trust, Administering the California Special Needs Trust, and Special Needs Trusts: Protecting Your Child’s Financial Future. She has published articles for the American Bar Association, American Association for Justice, National Academy of Elder Law Attorneys (NAELA) News, NAELA Journal, Journal of the Michigan Association for Justice, the Michigan Bar Journal, Estates and Trusts Magazine, and Elder Law Report. She has been quoted in the New York Times and Wall Street Journal. She is also the 2018 recipient of the Unsung Hero Award of the State Bar of Michigan, given annually to an attorney who has exhibited the highest standards of practice and commitment to the benefit of others.
An SNT is a type of trust designed to provide a person with a disability with assets to enhance his or her quality of life while at the same time allowing that person to remain eligible for needs-based public benefits. The two primary types of public benefit programs that are protected by use of an SNT are Supplemental Security Income (“SSI”) and Medicaid.
There are many other reasons why an SNT is valuable:
Providing supplemental lifetime support by purchasing additional items and services that make life more rewarding for the person with a disability;
Providing a system of advocacy to preserve the civil rights of the person with a disability;
Providing the funding for a safe and appropriate living arrangement so the person with a disability can live in the least restrictive environment;
Protecting the beneficiary from financial predators who take advantage of minors or vulnerable adults who may not have the capacity to protect themselves;
Investing the beneficiary’s assets in a way that will best protect the beneficiary throughout his or her lifetime to the maximum extent possible especially when the beneficiary is unsophisticated in managing his or her own resources;
Providing a system to provide ongoing and safe caregiving services;
Offering opportunities so the person with a disability can enjoy all social and recreational activities that enhance his or her quality of life;
Protecting the beneficiary’s assets by having someone responsible for insuring and otherwise protecting trust assets;
Paying all applicable taxes so the beneficiary is not later subject to penalties or fines for under reporting tax obligations;
and Reporting to the proper government, legal, and family when required by law or policy when using the SNT for the benefit of the beneficiary.
Critical Pointer: An improperly drafted SNT will cause the beneficiary to lose his or her benefits. There are many ways to draft an improper SNT; the most common are if a trust requires or allows payments to the beneficiary or allowing payments for beneficiary’s support. Thus, before someone agrees to take on the job of trustee, the trustee should have the trust reviewed by an experienced special needs attorney to make sure it was drafted and established correctly.
Special needs trusts are designed to supplement, not replace, the support provided by Supplemental Security Income, Supplemental Security Disability Income and Medicaid. They typically pay for things such as independent medical and dental expenses, annual independent check-ups, necessary or desirable equipment (like specially equipped vans), training and education, insurance, transportation, and essential dietary needs. If the trust is sufficiently funded, the disabled person can also receive spending money, electronic equipment and appliances, computers, vacations, movies, payments for a companion, and other products and services that can improve self-esteem and quality-of-life.
Examples of basic expenses that cannot be paid for by the special needs trust without jeopardizing government benefits include food or groceries, housing, property tax, homeowners insurance or association dues, utilities and/or hook up charges, and cash given directly to the beneficiary for ANY purpose. However, the trustee can use trust funds for food, clothing, and shelter if the trustee decides doing so is in the beneficiary’s best interest, despite the possible loss or reduction in public assistance.
Special Needs Trusts have a number of benefits. First, they create the ability for a Trust beneficiary to stay eligible for financially tested public benefit programs like Medicaid and Supplemental Security Income (SSI). In the process of maintaining eligibility for these programs, a Special Needs Trust also creates a supplemental fund that can be used to maximize the beneficiary’s quality of life. Since quality of life is a personal matter, the multiple benefits that flow from a Special Needs Trust are always defined by the needs and goals of the Trust beneficiary.
Yes, there are two kinds of SNTs, commonly referred to as “first-party” and “third-party” SNTs. The distinguishing feature between the two is who is putting the money into the trust. The difference is set forth as follows:
A first-party SNT is funded with the assets of the person with a disability.
A third-party SNT is funded with assets of anyone other than the beneficiary; typically, part of a parent or grandparent’s estate plan for a child with a disability. However, it is not limited to them; any person other than the person with a disability can fund this type of trust. Such a trust is funded with the assets of a “third party,” that is, parents, grandparents, or anyone else other than the person with a disability whom the trust benefits. This includes fund raising money or those raised through an on-line platform, like GoFundMe.
Choosing a professional trustee to administer a special needs trust offers many advantages over choosing a family member. For example, a professional trustee will manage all areas of the administration process, including the monitoring of investments, processing allowable distributions and preparing necessary annual court filings. In addition, public assistance program rules and guidelines are extremely complex and forever changing. Using an experienced, knowledgeable professional trustee ensures that the intricacies of the law are followed, the trust remains compliant and governmental benefits are not compromised. Furthermore, a corporate trustee lives on in perpetuity. Finally, a professional corporate trustee allows family members to avoid the problems and frustrations that can arise in the day to day administering of a special needs trust, and focus instead on being a loving, caring parent, sibling, grandparent or friend.
For people uncomfortable with having a “stranger” manage their loved one’s affairs, a corporate trustee and family member can be appointed Co-Trustees. In addition, a Trust Protector can be hired to monitor accounts and oversee the trustee’s actions and duties. And a Trust Advisor can be put in place to act as liaison between the beneficiary and the trustee to ensure that all personal needs are communicated to the trustee as completely and accurately as possible.