Photo by Jan Weber on Unsplash

Question:

I live in Illinow. and am in the process of getting a divorce. I’m 61.5 years and have Parkinson’s and I am of sound mind and want to set up a first-party special needs trust. I am on food stamps, Medicaid, Medicare and SSDI. I have also applied for SSI and I will be receiving a settlement from the divorce to fund the SNT. Must I have a trustee ? Does the divorce judge need to sign off on this? I am getting conflicting information from my divorce attorney. Can’t I manage my own SNT and have a secondary/backup trustee in the event I need one?

Response:

Those are two good questions. In terms of whether the judge needs to sign off on the trust, that’s not necessary in terms of the trust. You can create your own self-settled (d)(4)(A) trust without court involvement. I can’t comment on whether it might be necessary in terms of Illinois divorce law.

Whether you need someone else to serve as trustee for your trust is an interesting question that the federal statute authorizing the creation of self-settled (d)(4)(A) trusts doesn’t address. Neither do the POMS which govern eligibility for Supplemental Security Income (SSI). (https://secure.ssa.gov/poms.nsf/lnx/0501120203)

I’ve never seen a (d)(4)(A) trust where the beneficiary serves as trustee, but that doesn’t mean it can’t happen. One issue that could come up might have to do with the trust terms. Typically these trusts are entirely discretionary, but the Social Security Administration or state Medicaid agency might have an issue not counting assets in a trust over which you had total control. It might help to limit your discretion to a standard tax limitation, permitting you to make distributions to yourself for your “health, education, maintenance and support,” which is quite broad, but would not permit distributions for recreation or luxuries. You could start with yourself as the trustee and then name a third party to this role if the Social Security Administration or your state Medicaid agency objected.

Related Articles

Administering Special Needs Trusts and Preserving Public Benefits What Happens to Medicaid When You Switch from SSI to SSDI? How Can SSI Beneficiary Keep Medicaid Coverage When He Must Take Social Security?