Who can create a Special Needs Trust?
Special Needs Trusts are complex and need to comply with very specific rules to protect the disabled person’s assets. Depending on the type of SNT, it can be created by the disabled person, parents or grandparents, court-appointed guardian or court order. However, it is strongly recommended that the disabled person hire an attorney who specializes in elder law, estate planning or special needs planning for people with disabilities.
What does “means tested” mean?
Public benefits programs (such as Medicaid and SSI) are individually means tested. Means-tested programs restrict the eligibility for benefits to people with an income and/or assets less than a certain poverty level.
Who may deposit or put assets into a SNT?
Third-party trusts can accept assets that are not/have not been assets of the disabled person. Typical third-party trust donors are usually parents, family members and friends.
What is the minimum balance to create a trust?
All Trust I (self-funded), and funded Trust II (third-party funded) trusts must have a minimum starting balance of $750.00 (separate from the application fee of $250).
Does the amount deposited determine how much is spent annually?
The amount in the trust is a guide for WisPACT and the Trustee to use in making distributions. Immediate needs and wants, life expectancy of the Beneficiary, nature of the disability, public benefits received, and other resources are all taken into consideration.
What is a “pooled” or “community” trust?
Each Beneficiary has his or her own separate trust sub-account. However, for purposes of investment, the assets of these accounts are combined into a large “pooled” or “community” account. This enables the Trustee to charge lower fees and can result in a higher rate of return than separately managed trusts. Special Needs Trusts listed as “pooled” trusts are under d4c.
Must Special Needs Trusts be irrevocable?
Yes, once funded the trust is irrevocable, or it would not qualify to preserve the disabled person’s assets.
What is a distribution?
A distribution is a payment from the Beneficiary’s Trust account for goods or services provided to the Beneficiary. Payments are never made directly to the Beneficiary but to the vendor, agent or credit card company that provided the goods or services.
What kind of distributions can the Trust pay for?
The Trustee can make distributions to buy many goods and services for the Trust’s Beneficiary. In some ways it is easier to answer this question by explaining what limits are placed on distributions. Read the Advisor Guidebook for more examples.
What kind of distributions cannot be paid by the Trust?
The distributions may only be used for the sole benefit of the Beneficiary. Therefore the Trust cannot pay for gifts for other people. Generally public benefits laws prohibit cash distributions, meaning the Trust cannot pay for things that have already been purchased. The Trust needs to pay a store or service provider directly for goods or services provided. The Trust also pays for a third party that purchased the goods or services and can also pay off a credit card used for purchasing. Some public benefits programs (e.g., SSI) limit or prohibit distributions for food, shelter or housing.
How do I request a distribution?
Beneficiaries or their advisors fill out a Request For Distribution (RFD) form, attach appropriate statements (e.g., receipts for purchases, invoices or other explanatory information) and send it to WisPACT.
How long does a distribution take?
It usually takes less than two weeks for a distribution to be completed and sent out to the vendor, agent or credit card company.
What happens if payments are made that do not follow the public benefits rules?
If public benefits rules are not followed, there may be severe consequences. For example:
- The Beneficiary’s public benefits may be reduced or lost completely.
- Placement on waiting lists may be lost.
- In some cases, the government may start collection efforts to obtain repayment for incorrectly paid benefits.
Can I set up automatic payments for recurring bills?
Yes, direct billing arrangements can be set up for certain nonfluctuating, recurring monthly bills like rent or mortgages.
Can the Trust pay for the Beneficiary’s funeral expenses?
It depends on the type of trust. Third-Party Trusts may make distributions for funeral expenses for the Beneficiary because no payback is required to the state. Self-Fund pooled and payback trusts can only be used to pay for a pre-planned funeral expenses arranged before the Beneficiary’s death.