Q: What is a “SNT” and can I use it to buy food?
A: The acronym “SNT” refers to a special needs trust or a supplemental needs trust, a type of trust created for beneficiaries who are utilizing government benefits. SNTs allow for the beneficiary to keep their personal assets below required levels to maintain necessary government benefits while also protecting assets they earned or inherited. The type of SNT that is created depends on who is creating it and who is putting money into it.
There are two categories of SNTs: one created and funded for the benefit of someone else (known as a third-party trust) and one funded by the assets or income of the disabled person (known as a first-party trust). The first party trust can be created by the disabled person, their parent, grandparent, guardian, or by court order. A key difference between the two is the fate of the assets at the death of the beneficiary. A first party trust must provide that the assets go to the estate of the beneficiary to allow for a pay-back to Medicaid for services rendered during the disabled person’s lifetime, often leaving little for remainder beneficiaries to inherit. In contrast, in a third party trust the creator can designate family, friends or charities as remainder beneficiaries to inherit the remaining assets in the trust.
For situations where it is unclear if there will be a disabled beneficiary of the estate, a provision can be placed in the document that allows for a SNT to be triggered into place. This allows for a beneficiary who was not disabled at the time that you prepared your estate planning documents to benefit from a SNT if he or she later becomes disabled. This is a common update that is recommended to those with existing, and perhaps outdated, estate plans.
All of the assets left in a SNT can be used for the benefit of the disabled person. Specifically, the Trustee of a SNT has a fiduciary responsibility to use the assets in a way that enhances the life of the beneficiary and supplements any needs that are not met by government benefits. The SNT assets can be used to pay for a variety of items including clothing, entertainment, and necessities that are not otherwise covered by the government benefits.
A change in policy of the Social Security Administration became effective on September 30, 2024. As of that date, food is no longer considered “In-Kind Support and Maintenance” (ISM) for SSI purposes. Purchases that are counted as ISM will reduce the monthly amount received by SSI. This is a huge change that recognizes the vulnerability of SSI recipients and gives them the ability to use the trust for a broader category of need. Most importantly, it simplifies the reporting requirements and the risk of a monthly SSI benefit being reduced.
If you are receiving means-based government benefits (e.g., Medicaid or Social Security Supplemental Income), you should be sure you are maximizing your benefits and protecting your assets with a first party SNT. You should also be educating your friends and family who may be leaving you an inheritance that a third party SNT is the best way to ensure their gift to you remains protected.
By Britt Burner, Esq.
Britt Burner, Esq. is a Partner at Burner Prudenti Law, P.C. focusing her practice areas on Estate Planning and Elder Law. Burner Prudenti Law, P.C. serves clients from New York City to the east end of Long Island with offices located in East Setauket, Westhampton Beach, Manhattan and East Hampton.