Another component of almost every RLT I’ve drafted is a conditional Special Needs Trust (SNT). An SNT arises when a beneficiary is receiving needs-based government benefits. One of the more common benefits applicable to this situation is Medicaid. Where a person cannot afford something like long-term care, they may apply for and receive Medicaid who will cover the portion of long-term care that the person cannot afford. However, this program is generally only available to people who do not make enough money or have sufficient assets to pay for the care on their own.

As a result, if an individual who has been applying for or receiving Medicaid suddenly come into a pile of money, they are no longer eligible for Medicaid and Medicaid may take as much of that money as needed to repay themselves for anything spent on the person during their lifetimes. If you have a car accident that results in your death and your child receives a debilitating traumatic brain injury, they may need intensive long-term care. That care can easily exceed $20,000 per month. If the child has no other assets, they may be eligible to have Medicaid pay for that. But if they inherited money from you, they would have to spend all of it on their care before Medicaid stepped in. An SLT prevents that. It requires that any money that goes to someone who is receiving or applying for those benefits be held in a separate trust that can only be used for things that the government is not paying for and prevents the government from counting it as an available asset or seeking to take that inheritance. This simple tool could save millions of dollars of inheritance and benefits and allow that money to pay for a higher level of care and things that the government would not otherwise provide.