This is a protective trust for a disabled person. A SNT should be irrevocable, and can be set up while the settlor is alive (a “stand-alone SNT”) or it springs into being upon the settlor’s death, from the revocable living trust (a “testamentary SNT”). The settlor and initial trustee is typically the parent or other family member, and the beneficiary is the disabled person.
The main purpose of a SNT is to protect needs-based public benefits for the disabled beneficiary. All of the assets held in the trust are for the benefit of the beneficiary, but the beneficiary cannot change the trust or act as trustee. Because someone else besides the beneficiary has control over the trust assets, the assets in the trust are not considered the beneficiary’s countable assets for public benefits purposes, and the beneficiary can continue to qualify for benefits such as SSI and Medicaid (Medi-Cal in California).
A stand-alone SNT is usually set up with a minimum amount in it, say $10. This is called a “seed trust”. Once the trust is “funded”, that is, substantial assets are transferred into the trust, the trustee needs to get a tax ID number and start filing fiduciary income tax returns.