Tennessee is a probate friendly state. Clients need to discuss the pros and cons of a living trust with an attorney who is familiar with Tennessee probate and trust law as well as your personal family and financial situation.

Special Needs Trusts
Special needs trusts are a wonderful tool to provide for a disabled person who currently receives or may later receive Medicaid benefits. When a special needs trust is properly created and funded, the disabled person can continue to receive government benefits that are means tested such as Supplemental Security Income (SSI) and TennCare Medicaid benefits. The funds in the special needs trust are used to provide for the disabled person’s “supplemental needs.” There are restrictions on the use of the funds.

A special needs trust may be a “self-settled special needs trust” or a “third party special needs trust.” A self-settled special needs trust is a trust funded with the disabled person’s personal funds (usually a windfall from a personal injury suit or an inheritance). There are certain strict statutory requirements for when and who can create this type of trust. A self-settled special needs trust must contain a payback provision. Thus, when the beneficiary dies, any funds remaining in the trust must be used to first pay back the Medicaid system before the funds are distributed to family members.

A third party special needs trust is established by a person (Trustor) in his/her will, living revocable trust, or as a stand-alone trust for the benefit of a disabled person. This trust does NOT contain a payback provision. This trust is used to provide for the disabled person’s needs, which are not met by the government benefits, and there are certain restrictions. When the beneficiary dies, the funds remaining in the trust are distributed according to the Trustor’s wishes.
(click here to continue...)