Beaverton, OR asked in Divorce, Estate Planning and Family Law for Oregon

Q: How can my mother structure my brother's SNT to avoid funds becoming "marital assets" in the event of his divorce?

My mother plans to create a Special Needs Trust for my brother to manage any inheritance that he receives from her. This inheritance could exceed $500k. My brother is married, on disability, and a very poor money manager. My mother’s primary goals are to ensure that my brother has a safety net for many years, and secondly that my sister-in-law not be able to make a claim on any of these inherited assets in the event of a divorce. Beyond that she would prefer not to interfere in his life, and furthermore does not want to complicate the life of her trustee.

We are warned by the estate lawyer that a very simple direction to the trustee such as “deposit $2k/month from the trust into my brother’s bank account” could put trust income at risk of being considered a marital asset in the event of a divorce.

What can she and/or the trustee do to support both goals? What are the simplest options for the trustee?

1 Lawyer Answer
Jason E. Neufeld
Jason E. Neufeld
  • Estate Planning Lawyer
  • Aventura, FL

A: Your mother can create a Third Party Special Needs Trust (it can be embedded in her Living Trust or stand-alone). Mom can/should name anyone OTHER than your brother to serve as the trustee for this SNT with him as beneficiary. As an example: you could be trustee for your brother (in charge of managing his SNT trust funds).

I would not recommend using any of the SNT funds to give money directly to your brother. The SNT could, however, pay any of his bills. These trusts are structured as "sole benefit" trusts which should prevent it from ever being considered a marital asset.

This video further discusses Third Party Special Needs Trusts:

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