In our office, we routinely assist families in creating third party special needs trusts (SNTs) as part of their estate plans. This article explains the background on third party SNTs, the options available, and our process.
First Party Special Needs Trusts
In our office, we routinely assist individuals with disabilities or their families in creating first party special needs trusts (SNTs). This article explains the background on first party SNTs, the options available, and our process.
Background
To understand SNTs, let’s use the example of Jane Smith. Jane is 30 years old, and is physically healthy but has never been able to work or live independently due to an autism spectrum disorder. Jane lives in a group home, and receives SSI and Medicaid (MA). Jane’s father, John Smith, is guardian of her person and estate.
Jane’s grandmother Jill, who has always been close to her, names Jane as a beneficiary on a life insurance policy. At Jill’s death, Jane now becomes entitled to $100,000 of life insurance proceeds. What options are available to Jane (and John)?
Why We Don’t Use Irrevocable Trusts
We get a lot of client questions about protecting assets from the nursing home. It would be easy for us to sell an irrevocable trust to every prospective client who raises the issue (which, honestly, is a lot of them).
But we don’t. We spend time talking people out of them. Here’s why.
UNDERSTANDING MA
To understand why we don’t do irrevocable trusts, you first have to understand a little bit about how long term care is paid for in this country.
Everyone who reaches a certain age will receive Social Security and Medicare. The government calls these programs “entitlements,” meaning that all of us are entitled to them because we paid into the system with payroll taxes while we were working.
Should I Give My House to My Kids?
During an estate planning consultation, clients often have a simple question for us:
“If I end up in a nursing home, I want to make sure my kids get my (house, land, stock, etc.). How can I do that?”
Our short answer is:
“You can do it, but you might not like what you have to do.”
The full answer truly is a long answer to a short question. But it is an important answer to understand, even if it may not be the one everyone would like to hear.