Third Party Special Needs Trusts and Qualified Disability trust

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Joined: Wed Jan 01, 2014 10:16 am

Third Party Special Needs Trusts and Qualified Disability trust

Post by aeronina » Fri Sep 29, 2017 12:07 pm

We have a attorney preparing our revocable living trust so that our 3 grown sons each receive 1/3 of our estate each after we pass. One of our sons has been disabled for 21 years, receiving SSI and Medi-Cal. Our attorney has written both an Irrevocable Special Needs Trust for him and/or (should he get better, though unlikely) a Non-Special Needs Trust. I am concerned that by setting it up this way, the third party Special Needs Trust may not be able to qualify as a Qualified Disability Trust (with its yearly tax advantages). Does anyone have any experience with a revocable trust set up in this way?

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Re: Third Party Special Needs Trusts and Qualified Disability trust

Post by geobrick » Sat Mar 17, 2018 4:56 pm

Five months have past. Did you ever find an answer to your question?

I don't have your situation. I'm Trustee of one Trust written as a Special Needs Trust (though those words never apear, the language and restricitons make it clear).

What's different in the language of the two trusts. Is the 2nd one irrevocable as well?

I think it's good to have the option but at some point, only one should become active or funded. What does the RLT say about distributions to the two Trusts upon death? Does the executor/trustee make the decision at that point about which trust to fund? Does the non-SNT mandate distribution of all income (is it a simple or complex Trust?).

I think it would only become a problem from an SSI/MediCal perspective if both Trusts are significantly funded and income is distributed to him creating countable assets (or in-kind payments are made for him) from either trust.

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