Special Needs Trust
(Third-Party) (OK)

Summary

This special needs trust template is a stand-alone, third-party special needs trust for a disabled beneficiary in Oklahoma. The trust is intended to supplement and not supplant any means-tested government benefits for which the beneficiary is eligible, such as Medicaid and Social Security Insurance. This template includes practical guidance, drafting notes, and alternate clauses. The most common type of special needs trust (also referred to as a supplemental needs trust) is a third-party, discretionary special needs trust funded with assets that do not belong to the beneficiary. The trust can be established by any person except the beneficiary, and funded by any person other than the beneficiary. The trustee has absolute discretion as to how the trust assets are distributed. Third-party special needs trusts exist only under state law, have no particular definition of disability, have no monetary funding limitations, and impose no age limitations upon the beneficiary. Very importantly and advantageously, this is the only type of special needs trust that does not require a payback to the state upon the death of the beneficiary for any Medicaid services provided. Remaining trust assets may be distributed to another child, grandchild, or anyone else the settlor names in the trust. Be aware that in order to ensure benefit eligibility is not jeopardized, this type of trust must contain a provision stating that the trust will terminate if the trust is counted as an available resource for means-tested government benefits. Third-party special needs trusts can be established during the life of the settlor or as part of an estate plan, i.e., under a will or a revocable living trust. Once a third-party special needs trust is created and funded, no assets should pass directly to the beneficiary. All future gifts and legacies to the beneficiary should be made to the trust in order to maintain eligibility for needs-tested benefits. For this reason, counsel should advise the settlor to coordinate with relatives and friends who may also wish to make gifts or bequests to the beneficiary. For a discussion of tax issues pertaining to special needs trusts, see Special Needs Trusts and Taxes.