CLICK HERE TO CONTACT A SC PROBATE LAWYER

SPECIAL NEEDS TRUSTS

There are two different types of special needs trusts (SNTs). The first is a "self-settled" trust. A self-settled trust is typically one that an individual creates and funds with his or her own resources. In the case of a self-settled special needs trust, the disabled individual cannot create it himself. Federal law requires that it be created by a parent, grandparent, or guardian and be approved and supervised by the South Carolina probate court. The disabled individual's own resources, however, are transferred to the trust. This is commonly referred to as funding the trust. This type has one major disadvantage over a third-party special needs trust (often called a supplemental needs trust) in that a payback provision must be included in the document. What this means is that any state that has rendered Medicaid assistance will be paid back to the extent of such assistance out of the remaining funds. This occurs, however, only upon the death of the disabled individual. Third-party trusts are not required to have such a payback provision and any remaining money can be left to the individual's heirs or even revert back to the party that funded the trust. This type must be established and funded before the disabled individual attains the age of 65.

"Pooled" trusts are also self-settled special needs trusts. These trusts are typically used when the disabled individual is over the age of 65 or is under 65 and does not have a living parent or grandparent to create the trust. Of course, even if there is no living parent or grandparent, the court or the individual's guardian may create a trust for individuals under the age of 65.

Pooled trusts are managed by a non-profit organization. In the case of the pooled trust, the trustee opens a sub-account for each disabled individual and the assets are pooled for investment purposes. Because pooled trusts are self-settled trusts, the disabled individual's assets are subject to the payback provisions referred to above.

List of Pooled Special Needs Trusts in South Carolina

Third party trusts are created by a third party other than the disabled individual (like a parent or grandparent) and are funded with assets of the third party. The disabled individual's own assets cannot transferred to a third-party special needs trust. These trusts may be inter vivos or testamentary meaning that they can be effective during the third party's lifetime or after his or her death. Unlike self-settled SNTs, third-party SNTs have the advantage of not requiring a payback provision to any state which has rendered medical assistance upon the disabled individual's death. Thus, other family members may inherit trust assets remaining after the disabled individual's death.

Planning for both the resources of the disabled individual and to ensure that he or she can maintain or become eligible for SSI or Medicaid requires care. Further, estate planning for clients who have disabled children or other disabled family members who they want to benefit either during their lives or after death, requires competent legal counsel. The interplay of both federal and state law makes this area of practice even more challenging.

The trustee of a SNT has a unique set of responsibilities. The trustee must be keenly aware of the unique issues pertaining to distributions of trust principal and income when disabled individuals are beneficiaries. Keeping government benefits intact and preserving limited resources for such individuals are both paramount in clients' minds. Non-professional trustees will need competent counsel as to distribution planning for the disabled beneficiary as well as other trust administration issues.

In the case of a disabled child, a life care plan may be prepared to better assess the needs of that child. This is particularly so in the case if the child receives a personal injury settlement. A life care plan can be of utmost importance to the trustee who is working to invest assets to ensure that they will outlast the child and to maintain a quality of life for that child that adequately meets his or her medical and personal needs.

Lastly, trust investments are an important part of the planning. If parents have a disabled child but have limited financial resources, they may want to consider funding such a trust with life insurance to ensure that there are sufficient resources to adequately meet the child's needs. With regard to other trust assets, trustees have to be sufficiently prepared to invest assets to meet South Carolina state law requirements that pertain to trust investments as well as the needs of the disabled beneficiary.

South Carolina Special Needs Trusts Attorneys

  • Wayne Patterson
  • 116 West Stone Ave.
  • Greenville, SC 29609
  • 864-270-7973

Although based in Greenville, Wayne practices on a regular basis in all areas of South Carolina. Google Reviews.

Military members and special needs trusts

The 2015 National Defense Authorization Act gave military members and retirees the option to direct payment of a Survivor Benefit Plan for a dependent child to a Special Needs Trust (SNT).  A SNT is a legal instrument specifically designed for the benefit of a person with a disability and usually preserves the beneficiary’s eligibility for other federal or state benefits.

Eligibility Requirements

To be eligible to elect the option to cover the SNT under SBP, the member or retiree must have previously elected Spouse and Child or Child Only coverage for a disabled child under the SBP.  There must also be an established and certified SNT. Contact a South Carolina Probate Attorney to assist you with the drafting of the SNT to be sure that it meets all of the state and Federal requirements.

Who May Make the Election and Effective Dates

If the member is alive and if they have previously elected Spouse and Child or Child Only coverage under the SBP, they may make the designation to direct payment on the behalf of a beneficiary to a SNT at any time.

After the death of a member or retiree, if the member or retiree had elected Spouse and Child or Child Only coverage under the SBP, any surviving parent, grandparent or court appointed legal guardian may make the designation on the behalf of a beneficiary.

NOTICE!!!

This may be considered AN ADVERTISEMENT or Advertising Material under the Rules of Professional Conduct governing South Carolina lawyers. Under no circumstance will South Carolina Probate be held liable for any loss or damage caused by a visitor's reliance on information obtained through this web site or any other communication from us. It is the responsibility of each individual visitor to evaluate the accuracy, completeness or usefulness of any information, opinion, advice or other content. This site is intended to provide you only with general information. However, there is no guarantee that this information is comprehensive or accurate. South Carolina Probate does NOT provide legal, financial, or tax advice. Please consult a professional in these areas. Only an attorney licensed in your state can provide you with legal advice. This is a PRIVATE COMMERCIAL WEBSITE and not associated with any governmental agency.