Minnesota Special Needs Trusts

Estate Planning, Pooled Trusts, and the Intersection of Federal and State Law

Estate planning can take come in a variety of ways. For parents with children with disabilities, the special needs trust (SNT) is a unique estate planning device specifically tailored for beneficiaries with disabilities. The goal of this article is to examine SNTs, its intersection with federal law, and the various complications that may arise when conflict with state law arises. This is a complex area of the law, and for those considering this estate planning device, consultation with an expert Minnesota estate planning attorney is recommended.

Minnesota Special Needs Trust

One type of special needs trust is a special needs pooled trust. A special needs pooled trust is run by a nonprofit organization to administer the trust on behalf of people with disabilities. (Stepehn Elias, Special Needs Trusts, 107 (Nolo 3d. ed. 2009)). The special needs pooled trust flows from the federal Medicaid statute that excludes certain assets from Medicaid eligibility determinations. (Laurie Hanson, Reintroduction to Pooled Trusts, Stetson Univ. Conf. on Special Needs Trusts, Oct. 14-16, 2015).

For purposes of Medicaid exemption, the trust must meet four requirements. The trust must be for the benefit of 1) a disabled person 2) managed by a nonprofit agency 3) that maintains trusts solely for the benefit of disabled person established by that parents, grandparents, or legal guardian, and 4) to the extent amounts are not retained by the trust upon the death of the beneficiary, the trust pays the state the remaining amounts. 42 U.S.C 1396p(d)(4)(C)(i)-(iv). Special needs pooled trusts offer the advantage of the trust with the management experience of a nonprofit.

Medical Assistance and Minnesota Probate Law

As stated above, 42 U.S.C. 1396p(d)(4)(iv) provides states with an avenue to recover expenses paid on behalf of a beneficiary of medical assistance. These scenarios intersect with state law as well. There are examples of this in Minnesota. In In re Estate of Gullberg, the Minnesota Department of Human Services and Dakota County sought reimbursement for medical assistance paid on behalf of the estates husband. In 1983, the decedents husband conveyed their homestead valued at $59,000 to the decedent. The husband thereafter applied for medical assistance and received it from the state. In re Estate of Gullberg, 652 N.W. 2d 709, 711 (Minn. Ct. App. 2002).

Following the death of both the husband and wife, the state filed a claim with the estate for recovery of expenses paid. Id. For purposes of Medicaid, property meant real property to which the decedent had legal title (which the recipient did not have). However, the Minnesota estate recovery law defined property to include any property jointly owned (which applied to the recipient). Id. at 712. The Court of Appeals held the Minnesota estate recovery law [went] beyond what is allowed at federal law. Id. at 714. However, for the Court, the construction allowed for only partial preemption of state law. The Court of Appeals therefore concluded that Minnesotas estate recovery statute allows recovery against a surviving spouses estate only to the extent of the value of the recipients interest . . . at the time of the recipients death. Id.

Although not a special needs pooled trust case, In re Gullberg provides an overview of how estate planning, Medicaid assistance, and state law interact. In sum, utilizing special needs pooled trust while receiving Medicaid can create unforeseen complexities. A helpful Minnesota estate planning attorney can help those considering this estate planning vehicle effectively administer their estate.