This letter will be of great help to you if you mediate divorce and other family law matters. I have been preparing Supplemental Needs Trusts for many years for the Personal Injury Bar.

Recently, I was retained to assist an attorney handling a divorce for a client who is disabled. Without a Supplemental Needs Trust, the sale of the marital home will cause the client to lose her MassHealth.

In another case, we had to prepare a Supplemental Needs Trust to protect the mentally challenged child who was on S.S.I. Without the trust, future monies passed to him on the death of his father result in this needy child to lose both his S.S.I. and his MassHealth.

What is a Supplemental Needs Trust?

A Supplemental Needs Trust (SNT) is a discretionary, spendthrift trust created for a person (beneficiary) who has a disability or is elderly and is designed as a way to supplement and enhance the lifestyle of the beneficiary and specifically not to supplant the person’s public benefits. Public benefits include Supplemental Security Income (SSI), Medicaid and Section 8 Housing. One of the many appealing aspects of an SNT is that the beneficiary does not have direct access to the trust assets, which are therefore not “countable” when establishing financial eligibility for public benefits. (SSDI is not in this equation at all.)

SNT assets can be used to purchase a home for the beneficiary or services that Medicaid does not cover (including special therapies, wheelchairs, handicap accessible vans and mechanical beds), recreational and cultural experiences and, really almost anything that will be used to enrich the beneficiary’s life. For a more comprehensive list of these items go and look for the big red box labeled ‘Free Trusts Guide’.

Several requirements must be met when establishing an SNT. First, the trustee must be given absolute control over the distribution of the trust assets. The trustee, for example, cannot take any direction from the beneficiary. Second, the beneficiary cannot have authority to revoke the trust. If the beneficiary had this authority, the trust assets would be deemed an available resource and he would lose all his public benefits. Third, the trustee cannot give cash outright to the beneficiary, as this would cause an immediate partial reduction and perhaps even a total loss of public benefits. However, there is some ‘wiggle room’ here if the beneficiary is only on Medicaid

Thoughtful consideration should also be given to the designation of a trustee of any SNT. The trustee should be sensitive to the disability of the beneficiary, actively monitor any services provided, aggressively advocate for all entitlements, and prudently invest SNT funds.

While the government benefits are critical to the well-being of most individuals with disabilities, public assistance does not address a significant number of needs and preferences that contribute to a comfortable life. Establishing a special needs trust is an important step towards creating financial security for the client with special needs.

These trusts therefore are absolutely required if a spouse or child is on MassHealth or S.S.I.

Feel free to contact me if you would like further information.

Very Truly Yours,

Thomas R. Mullen

Thomas R. Mullen
Thomas R. Mullen has been an attorney since 1977 and has devoted his practice exclusively to elderlaw since 1988. He is nationally recognized as one of the foremost experts on Medicaid planning. His additional Practice areas include estate planning and trusts for disabled people, as well as assisting attorneys with Medicaid lien allocations and the Medicare Secondary Payer Act. In the Spring 2013 issue of the National Academy of Elder Law Attorneys (NAELA) Journal, Attorney Thomas R. Mullen of Quincy, Mass. was described by the Academy’s Massachusetts past president and law professor William J.Brisk as being “a prominent and innovative elderlaw attorney.”