If you're in Minnesota and have a family member with special needs who is receiving government benefits, you probably know that you need a special type of estate plan to protect those benefits. Simply downloading a cookie-cutter will from a website won't be of much help to your family when you're gone and can actually cause a lot more problems than you can even anticipate. For most families, the best type of estate plan is one that includes a Special Needs Trust for the benefit of their family member with special needs.
When you do research, you'll probably find two different terms in the arena of this type of estate planning:
- Special Needs Trust
- Supplemental Needs Trust
A common question at consultations is "What's the difference between a Special Needs and Supplemental Needs Trust?" The simple answer is nothing, but some explanation probably will help.
A Quick History
When families began to use special needs trusts for their estates, the common term that was used was Supplemental Needs trust. These new types of trusts were being used to supplement the benefits the person was receiving, so it seemed like a logical name for them. They were specifically targeting benefits from programs like Medicaid, Medicare, Social Security, Supplemental Security Income and other public benefit programs from the Minnesota state agencies.
In 1993, the federal government passed a law that allowed for the creation of First-Party Special Needs Trusts. Prior to the enactment of that law, the trusts that were being used were Third-Party Special Needs Trusts created by the family member of the person with special needs. The new law allowed the special needs person's assets to be used to fund the trust (a First-Party Special Needs Trust) and they took on the name "Special Needs Trust" and the traditional Third-Party Special Needs Trust became known as a "Supplemental Needs Trust."
The Modern Take on Things
Although you may find both terms are still used, they really both belong to the same type of trust, a Special Needs Trust. It's really two sides of the same coin - special needs refer to the purpose of the trust (the person who has special needs) and supplemental needs refer to the public benefits that the trust is created to preserve. Special Needs Trusts is now the term generally used to refer to the variety of trusts that are created for a beneficiary with special needs. Instead of distinguishing between special needs and supplemental needs, we view the three types of trusts as
The evolution of the terms should hopefully help you understand the importance of working with a professional who can listen to you and understand your actual needs. If you've done some research and settled on a supplemental needs trust without speaking to a professional, you can still end up with the wrong type of trust for your legacy.
Next Steps
If you'd like to discuss special needs trusts and estate planning further, let's set up a Legal Strategy Session to review the best options for you and your family.
