Fundamentals of Special Needs Trusts § 3.03
& Lifetime Gifting
Inheritance into a First-Party SNT
The SNT attorney may be
faced with a situation where a decedent leaves a bequest to an individual with
a disability not understanding the adverse impact the gift will have on that
individual. In these cases, depending on state law, it may be possible to
redirect or divert the inheritance into a SNT. In such cases, since
inheritances vest under common law at the moment of death,1
such a gift becomes the property of the recipient and any SNT created in these
circumstances becomes a first-party SNT subject to estate recovery claims on
the death of the beneficiary or earlier termination of the SNT. See §
11.09. If the inheritance can be redirected into a SNT, the current
benefits of the individual will not be affected.
If the intended SNT
beneficiary is under an existing conservatorship or guardianship a petition for
substituted judgment can be brought establishing the SNT and directing the
guardian or conservator to deposit the inheritance into the SNT. Since the SNT
in this instance would be created by a judicial proceeding resulting in a court
order creating the SNT, the resulting SNT satisfies the requirements of 42
U.S.C. § 1396p(d)(4)(A). Form 3.203 is a sample petition.
Another approach used
frequently in California, where the individual with a disability has capacity
and is not under a conservatorship, is for the individual to execute a limited
durable power of attorney authorizing the agent under the power to draft a SNT
for the benefit of the individual and then file a petition for confirmation of
the agent's act under California's Probate Code and a court order establishing
the SNT. Done this way the court order ratifying the agent's act and ordering
the creation of the SNT should act as an order for purposes of 42 U.S.C. §
1396p(d)(4)(A). Note that the agent is not creating the SNT and seeking
ratification of her actions in doing so. While that might result in a court
order ratifying the existence of the SNT created by the agent, it would not
constitute a SNT created by court order as required by the Statute.2
download is part of Fundamentals of Special Needs Trusts, which places
special needs trusts in the arsenal of tools available to an attorney to help
his senior clients and those who have disabilities. It helps the practitioner
to understand how she can draft a trust, using the person's own funds or the
funds of another, to provide goods and services for those clients that will
enhance their everyday existence.
of Special Needs Trusts provides practitioners with analysis of the
law, authoritative advice, practice notes, checklists, and forms. It begins
with a discussion of the history of special needs trusts, discusses ethical
issues, explains the various types of special needs trusts and how to draft,
fund, and administer those trusts, how and when to terminate them, and the
relevant tax considerations.
conduct a search in Fundamentals of Special Needs Trusts.
of Special Needs Trusts is a reasonably priced desk manual that is available at the LexisNexis Store and is the product
of highly experienced practitioners.
See, e.g., Kingsbury v. Scoville's Admin., 26 Conn. 349 (Conn. 1857).
See Cal. Probate Code § 4541 and POMS SI 01120.203g.