Special needs trust (SNT)
Supplements a disabled beneficiary without disqualifying them from means-tested public benefits (Medicaid, SSI). Distribution rules are strict; some types require Medicaid payback at death.
| Facet | Detail |
|---|---|
| Also called | Supplemental needs trust, d4A trust (self-settled), third-party SNT |
| A-B / A-B-C role | None |
| When created | Third-party: by family; self-settled: with beneficiary's funds |
| Revocable | Third-party: may be in RLT until death; then irrevocable |
| Inter vivos / testamentary | Either |
| Typical beneficiaries | Individual with disability |
| Primary purpose | Quality-of-life supplements while preserving benefits |
| Marital deduction | No |
| Uses estate exclusion | At funding from estate or gifts |
| In survivor's estate | No |
| Basis step-up | At testamentary funding |
| Income tax | Trust 1041; rules vary by trust type |
| Crummey powers | Rare |
| GST / dynasty | May apply if skip person is beneficiary |
| Spendthrift | Yes — integral to benefits planning |
| See-through (IRA) | Generally poor — consider ABLE account or individual beneficiary planning |
| Key tradeoff | Benefits preservation vs strict distribution limits and payback risk (self-settled) |