1. Special Needs--generally refers to items or services that contribute to the happiness and comfort of a person with a disability when such items or services are not adequately being provided for by a public or private agency.
2. Trusts-- is a property interest, whereby, property is held by an individual or entity (such as a bank) called the trustee, subject to a fiduciary duty, to use the property for the benefit of another (the beneficiary).
3. Special Needs Trusts--are a subset of trusts designed to allow a disabled beneficiary to maintain eligibility for public benefits that cover basic needs, while also receiving resources from his or her family that provide a higher quality of life.
4. Self-Settled Special Needs Trust--must be funded with the assets of a disabled individual under the age of sixty-five. To be considered "disabled," the individual "must be unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve months. The trust must also be established by someone other than the disabled individual, such as a parent, grandparent, or legal guardian, for the sole benefit of the disabled individual. This trust must contain a "payback" provision, stating that all funds left in the trust after the disabled beneficiary dies will be used to repay the state Medicaid agency for the assistance provided.
5. Pooled Special Needs Trust-- these trusts are managed by nonprofit associations, which maintain separate accounts for each disabled beneficiary, but pool the funds for investment purposes. These trusts can be established by the disabled beneficiary him or herself, or by a parent, grandparent, or legal guardian. This trust must contain a provision stating that when the beneficiary dies, the remaining funds in the account will either be distributed to other members of the pooled trust or used to pay back state Medicaid agencies. These trust are most commonly used when the family of the disabled individual cannot choose a trustee or afford to hire a professional trustee. A family and or disabled individual may choose this type of trust so the funds will go to the other disabled people in the pooled trust instead of the funds going to the state.
6. Third-Party Special Needs Trusts—this trust differs from self-settled and pooled trusts in that they are funded with the assets of someone other than the disabled beneficiary. This trust is usually established by a parent, grandparent, or legal guardian of a disabled individual. This trust can be either inter vivos which is established during the grantors life or testamentary which is created through a will. Inter vivos trusts allow the parents or grandparents of a disabled child to put funds into the trust and ensure that the trust functions properly before they die. This trust is exempt from payback requirements like self-settled and pooled trusts. This means the grantor can designate that the funds should pass to remainder beneficiaries, such as the disabled individuals siblings, after the disabled beneficiary dies.
7.Grantor--- A grantor (also called a settlor or trustor) is the individual who provides the trust principal (or corpus). The grantor must be the owner or have legal right to the property or be otherwise qualified to transfer it. Therefore, an individual may be a grantor even if an agent or other individual, legally empowered to act on his or her behalf (e.g., a legal guardian, representative payee for Title II/XVI benefits, person acting under a power of attorney, or conservator), establishes the trust with funds or property that belong to the individual. The individual funding the trust is the grantor, even in situations where the trust agreement shows a person legally empowered to act on the individual's behalf as the grantor. Where more than one person provides property to the trust, there may be multiple grantors. The terms grantor, trustor, and settlor may be used interchangeably.
8. Trustee-- a trustee is a person or entity who holds legal title to property for the use of or benefit of another. In most instances, the trustee has no legal right to revoke the trust or use the property for his or her own benefit.
9. Fiduciary Duty-- is the obligation of the trustee in dealing with the trust property and income. The trustee holds the property solely for the benefit of the beneficiary with due care. The trustee owes duties of good faith and loyalty to exercise reasonable care and skill, to preserve the trust property and make it productive and to account for it. Because the trustee is a fiduciary does not mean that he or she is an agent of the beneficiary. The person who establishes a trust should not be confused with the grantor, who provides the assets that form the principal of the trust.
10. Trust Beneficiary--is a person for whose benefit a trust exists. A beneficiary does not hold legal title to trust property but does have an equitable ownership interest in it. As equitable owner, the beneficiary has certain rights that will be enforced by a court because the trust exists for his or her benefit. The beneficiary receives the benefits of the trust while the trustee holds the title and duties.
11. Trust Principal-- is the property placed in trust by the grantor which the trustee holds, subject to the rights of the beneficiary, and includes any trust earnings paid into the trust and left to accumulate. Also called "the corpus of the trust."
12. Trust Earnings/Income--are amounts earned by the trust principal. They may take such forms as interest, dividends, royalties, rents, etc. These amounts are unearned income to any person legally able to use them for personal support and maintenance.
13. Grantor Trust-- subject to State law, a grantor trust is a trust in which the grantor of the trust is also the sole beneficiary of the trust. State law on grantor trusts varies.
14. Mandatory Trust--is a trust that requires the trustee to pay trust earnings or principal to or for the benefit of the beneficiary at certain times. The trust may require disbursement of a specified percentage or dollar amount of the trust earnings or may obligate the trustee to spend income and principal, as necessary, to provide a specified standard of care. The trustee has no discretion as to the amount of the payment or to whom it will be distributed.
15. Discretionary Trust-- is a trust in which the trustee has full discretion as to the time, purpose and amount off all distributions. The trustee may pay to, or for the benefit of, the beneficiary, all or none of the trust as he or she considers appropriate. The beneficiary has no control over the trust.
16. Residual Beneficiary-- is not a current beneficiary of a trust, but will receive the residual benefit of the trust contingent upon the occurrence of a specific event, e.g., the death of the primary beneficiary.
17. Intervivos Trust--is a trust established during the lifetime of the grantor. It may also be called a living trust.
18. Testamentary Trust-- is a trust established by a will and effective at the time of the testator's death.
19. Spendthrift Clause/Trust-- prohibits both involuntary and voluntary transfers of the beneficiary's interest in the trust income or principal. This means that the beneficiary's creditors must wait until money is paid from the trust to the beneficiary before they can attempt to claim it to satisfy debts. It also means that, for example, if the beneficiary is entitled to $100 a month from the trust, the beneficiary cannot sell his or her right to receive the monthly payments to a third party for a lump sum. In other words, a valid spendthrift clause would make the value of the beneficiary's right to receive payments not countable as a resource. However, a spendthrift clauses are not recognized in all States. Additionally, States that recognize spendthrift trusts generally do not allow a grantor to establish a spendthrift trust for his or her own benefit, i.e., as a beneficiary. Thus, using the example from above, in those States where spendthrift clauses are not recognized (whether at all or because the trust is a grantor trust), the value of the beneficiary's right to receive monthly payments should be counted as a resource because it may be sold for a lump sum.
This is an excellent resource that anyone who drafts special needs trusts will want to have on his or her bookshelf, is "Special Needs Trust Handbook," by Thomas D. Begley, Jr. and Angela E. Cannellos, published by Walter Kluwer.
The Center for Special Needs Trust Administration, Inc. is a 501(c)(3) non-profit corporation that administers Pooled Trusts and Special Needs Trusts. From the time of its founding on December 8, 2000, it quickly grew to become the largest Pooled Trust provider in the country and has been a clear industry leader ever since. With trust beneficiaries in every state and nearly two decades of experience, The Center for Special Needs Trust Administration, Inc. is firmly established as the go-to provider for cases from the simple to the highly complex. In addition, many non-profits have entrusted their Pooled Trust programs to The Center for Special Needs Trust Administration, Inc. Likewise, many professionals have successfully turned to the Center for Special Needs Trust Administration, Inc. for truly one of a kind solutions to their unique specialty trust needs.
When establishing a special needs trust, under Florida's trust code, the trust must observe the same formalities required for execution of a will. Thus, the settlor must have capacity to create a will to create a trust; knows its importance and impact; have a good general knowledge of his/her assets and heirs; and be capable of understanding its purpose.The trust must be signed in the presence of two witnesses and a notary public, and a "self-proving will" affidavit should be used to show the capacity of the settlor; the fact that the witnesses and settlor signed in each other's presence; and that all such parties are known by or have been properly identified by the notary.
