North Carolina Estate Planning Blog : North Carolina Estate Planning Lawyer & Attorney : Trust Counsel, PA : Trust Administration : Serving Chapel Hill, Durham, Raleigh, Pittsboro, Orange County, Chatham County

Special Needs Trusts (SNTs), also sometimes referred to as Supplemental Needs Trusts, are used to provide supplemental benefits to disabled or elderly persons receiving governmental benefits (such as Medicaid and SSI) while not disqualifying them for the benefits. 

There is a distinction between "self-settled" or "first party" trusts, which are funded with the disabled persons own assets, and most often called special needs trusts, and "third party trusts", which are set up by another person and funded with that person's money.  The latter are often referred to as supplemental needs trusts.  The laws regarding SNTs are very complex, and such trusts should be drafted only by attorneys experienced in that area of the law.

The administration of SNTs is also complex.  Only certain types of expenditures are allowed.  The wrong type of payments from the trust can disqualify the beneficiary from receiving governmental benefits.  I currently serve as trustee for several SNTs - given the many needs of a disabled beneficiary, it can be a demanding job.

For examples of what expenditures from an SNT are allowable, and those that aren't, click "Continue Reading."

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Governor Bev Perdue recently signed into law Session Law 2009-267, which:

• modifies North Carolina General Statutes Section 36C-2-203(a)(9) to state the proceedings may be brought before the Clerk of Superior Court to create a trust.
• Adds a provision to NCGS Section 36C-4-401 providing that a court may create a trust, including a trust pursuant to 42 USC Section 1396p(d)(4) [Special Needs Trust].
• Adds Section 36C-4-401.2, which provides that any interested party may petition the court to establish a trust pursuant to 42 USC Section 1396p(d)(4.

The changes are effective October 1, 2009.

The new laws will be extremely helpful, as Special Needs Trusts under 42 USC Section 1396p(d)(4) must be established by a parent, grandparent, legal guardian or court.  If there is no parent or grandparent is is willing and able, and no guardian, the only way to protect Medicaid and SSI benefits by using a Special Needs Trust is by having one created by the court.

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I recently posted a link to an article on Special Needs Trusts - here's another one from the Wall Street Journal, which quotes several well known lawyers, including Barry Nelson in Miami, who has a special needs child himself.

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A recent article in the Baltimore Sun discusses the special planning that should be done by parents of children with disabilities.  I think the article is good, although it it states that one should contact a lawyer OR financial planner who is an expert in the area.  While enlisting the advice of a knowledgeable financial planner might not be a bad idea, it is an absolute must to have an expert attorney involved as well.  Financial planners cannot prepare wills or trust documents.

North Carolina also has at least one non-profit organization that offers "pooled" trusts - Life Plan Trust.

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