A Special Needs Trust (SNT) in North Carolina is a legal arrangement designed to benefit an individual with disabilities without disqualifying them from receiving essential government benefits such as Medicaid and Supplemental Security Income (SSI).

The trust holds assets for the beneficiary’s use, with a trustee managing and disbursing funds in a way that supplements, but does not replace, government assistance.

The trust works by providing financial resources for the beneficiary’s additional needs that are not covered by public benefits. These can include personal care attendants, out-of-pocket medical and dental expenses, education, transportation, and recreation.

Since the assets in the trust are not owned directly by the beneficiary, they do not count towards the asset limits that typically apply for eligibility for government assistance programs.

In North Carolina, setting up an SNT requires careful drafting to ensure it meets specific legal requirements and truly serves the beneficiary’s best interests. It can be established by the following individuals:

• Parent
• Grandparent
• Legal guardian
• The individual with disabilities (under certain circumstances)
• By a court

It’s crucial for an SNT to be set up in accordance with both state and federal laws to ensure it does not affect the beneficiary’s eligibility for public benefits.

Get in touch with us at Vail Gardner Law for a free consultation to find out more about how to set up an SNT for your loved one.

In North Carolina, understanding the differences between a first-party special needs trust and a third-party special needs trust is crucial for proper estate planning for individuals with disabilities. Here’s a breakdown of each:

1. First-Party Special Needs Trust: Also known as a Self-Settled Trust, this type of trust is funded with assets owned by the person with disabilities, such as an inheritance received directly, a legal settlement, or savings.

The key characteristics include:

• The beneficiary must be under 65 years old when the trust is established.
• Trust must be designed to preserve the beneficiary’s eligibility for public benefits like Medicaid and SSI while allowing the trust assets to be used for their benefit.
• Upon the beneficiary’s death, any remaining assets in the trust are subject to a payback provision to reimburse the state for Medicaid benefits received by the beneficiary during their lifetime.

2. Third-Party Special Needs Trust: This trust is funded with assets from someone other than the beneficiary, typically parents, grandparents, or other family members, intending to provide for the disabled individual’s extra needs.

The key characteristics include:

• There is no age restriction for the beneficiary when establishing the trust.
• Like the first-party trust, it allows the beneficiary to maintain eligibility for government assistance programs.
• A significant difference is that upon the beneficiary’s death, there is no requirement for the remaining assets to be used to reimburse the state for Medicaid benefits. Instead, the remaining assets can be distributed according to the grantor’s wishes to other family members, charities, or other beneficiaries named in the trust document.

Choosing between a first-party and a third-party special needs trust in North Carolina depends on the source of the funds to be placed in the trust and the specific goals of the estate planning. You’ll want to consider Medicaid payback requirements and the desired distribution of assets after the beneficiary’s death.

Find the professional legal guidance essential to navigate these complex decisions and ensure the trust is properly established and administered at Vail Gardner Law. 

Get in touch today for a free consultation. We’re here to answer questions and help you make the best decisions for your loved ones.

Funding a Special Needs Trust (SNT) in North Carolina can be achieved using a variety of assets to ensure the beneficiary’s needs are met without impacting their eligibility for government assistance programs.

Here’s how you can fund an SNT and the types of assets you might consider:

1. Cash and Savings: Direct financial contributions, including savings and cash gifts from family or friends, can be used to fund an SNT, providing flexible resources for the trustee to manage.

2. Investment Accounts: Stocks, bonds, mutual funds, and other investment accounts can be transferred into an SNT, allowing the trust to grow over time and provide ongoing support for the beneficiary.

3. Real Estate: Property, including homes or other real estate holdings, can be placed into an SNT. The trust can then use the property for the beneficiary’s benefit or sell it to fund other needs.

4. Life Insurance Policies: Naming the SNT as a beneficiary of a life insurance policy is a common strategy for providing a significant financial resource to the trust upon the policyholder’s death.

5. Retirement Accounts: While more complex due to tax considerations, retirement accounts like IRAs and 401(k)s can also be used to fund an SNT, often through beneficiary designations.

6. Inheritances: Planning ahead, family members can direct inheritances to the SNT rather than directly to the individual with special needs, preserving benefit eligibility.

7. Personal Property: Valuables such as jewelry, art, collectibles, or vehicles can be contributed to the trust and either used for the benefit of the beneficiary or sold to support their needs.

When funding an SNT, it’s important to consider the long-term needs of the beneficiary, including anticipated future expenses and the potential impact on benefit eligibility.

Set up a free consultation today and talk with an experienced special needs planning attorney. We can answer any questions and help ensure that the trust is properly funded and structured to meet the beneficiary’s needs effectively.

Choosing the right trustee for a Special Needs Trust (SNT) in North Carolina involves careful consideration to ensure that the beneficiary’s needs are met and the trust’s assets are managed effectively. Here are key factors to consider when selecting a trustee for an SNT:

1. Understanding of the Beneficiary’s Needs: Ideally, the trustee should have a deep understanding of the beneficiary’s disabilities, daily needs, and long-term care requirements. This ensures that distributions are made in a way that enhances the beneficiary’s quality of life without jeopardizing eligibility for government benefits.

2. Financial Acumen: The trustee should possess or have access to solid financial management skills, as they will be responsible for investing trust assets, managing budgets, and ensuring the trust complies with all legal and tax obligations.

3. Familiarity with Government Benefits: Knowledge of the rules and regulations surrounding government assistance programs like Medicaid and Supplemental Security Income (SSI) is crucial. The trustee must make distributions in a manner that does not disqualify the beneficiary from receiving these essential benefits.

4. Availability and Commitment: Managing an SNT is an ongoing responsibility. The trustee should be willing and able to commit the time and attention required to manage the trust effectively over the long term, potentially spanning the beneficiary’s lifetime.

5. Integrity and Reliability: Trustworthiness is paramount, as the trustee will have significant control over the beneficiary’s financial well-being. Choose someone with a strong sense of duty and a track record of responsible and ethical behavior.

6. Willingness to Seek Professional Advice: The best trustees are those who recognize when they need help from professionals, such as attorneys, accountants, and financial advisors, to make informed decisions about trust management and beneficiary care.

For many families, choosing a family member or close friend who meets these criteria is a good option, but it’s not uncommon to appoint a professional trustee, such as a bank or trust company, especially if managing the trust requires specialized knowledge or if there’s a concern about family dynamics.

Some families opt for a co-trusteeship, combining the personal insight of a family member with the professional expertise of a financial institution or specialized trust company.

Given the complexities involved, consulting with an estate planning attorney experienced in special needs trusts in North Carolina can provide valuable guidance in selecting the right trustee and setting up the trust to best serve the beneficiary’s interests.

Set up a free consultation with us at Vail Gardner Law to discuss any questions or concerns you have about SNT creation and choosing a trustee.

A Special Needs Trust (SNT) in North Carolina is specifically designed to maintain a beneficiary’s eligibility for government assistance programs, such as Medicaid and Supplemental Security Income (SSI), while providing for expenses that enhance the beneficiary’s quality of life beyond what these programs cover.

Here’s how an SNT impacts government benefit eligibility:

1. Asset Ownership: Assets held within an SNT are not owned directly by the beneficiary but by the trust itself. This distinction is crucial because assets owned by the trust do not count towards the asset limits imposed by government programs. For example, to qualify for SSI, an individual’s countable assets must generally not exceed $2,000, but assets in an SNT are not included in this calculation.

2. Supplemental Support: The trust is intended to provide supplemental support, meaning it pays for expenses not covered by government benefits. This can include education, recreation, counseling, and medical care not provided through Medicaid, personal care attendants, and other quality-of-life enhancements.

3. Direct Payments: An SNT must be structured so that distributions do not disqualify the beneficiary from receiving government benefits. Typically, this means the trust should not give cash directly to the beneficiary, as this could be counted as income by SSI and reduce or eliminate the beneficiary’s benefits. Instead, payments should be made directly to service providers or to purchase goods and services for the beneficiary’s benefit.

4. Trustee Role: The trustee’s role is pivotal in managing the trust in a way that preserves benefit eligibility. The trustee must understand the rules of the government programs involved and make distributions in a manner that complements these benefits. This often requires careful planning and coordination with the beneficiary’s other sources of support.

5. Medicaid Payback Provision: For first-party SNTs (funded with the beneficiary’s own assets), there is typically a Medicaid payback provision. This means that upon the beneficiary’s death, any remaining assets in the trust may be used to reimburse the state for Medicaid benefits paid on behalf of the beneficiary during their lifetime.

By carefully adhering to the rules governing SNTs, beneficiaries can enjoy the benefits of the trust’s assets without losing their critical government assistance.

Given the complexity of these rules, working with an experienced special needs planning attorney in North Carolina is crucial to ensure that the SNT is properly established and administered.

At Vail Gardner Law, we offer a free consultation to help answer any questions and concerns as you begin your journey to consider or establish an SNT for your loved one.