BASICS OF A SETTLEMENT MGMT TRUST (SMT)

WHY USE A SETTLEMENT MANAGEMENT TRUST?

The ideal candidate for a SMT is an individual who needs an independent third-party trustee to protect his/her interests. The purpose of a Settlement Management Trust (SMT) is to protect individuals that may be vulnerable to financial abuse or have the inability to spend funds in accordance with their best interest. The Trustee of a SMT screens disbursements to ensure that they make fiduciary sense. The individual may be vulnerable and may or may not be disabled.

GENERAL RULES OF A SMT

As Trustee, CPT Institute follows three general guidelines when administering a Settlement Management Trust:

  1. As Trustee, CPT Institute has a fiduciary duty to the Trust Beneficiary - A fiduciary duty is the highest standard one person can owe another under the law. By definition, this means CPT Institute is required to act in the best interest of the Trust Beneficiary.
  2. All disbursements from the SMT must have a direct benefit to the Trust Beneficiary - Funds placed in a SMT must be used for the Trust Beneficiary’s primary benefit. Some examples include, but are not limited to, products or services related to the Trust Beneficiary’s health, education, maintenance, or support. In the event that the Trust Beneficiary of a SMT is a minor, a parent has a duty to provide for his/her child in a manner that is consistent with his/her own standard of living when requesting disbursements related to shelter, food, and utilities (some exceptions apply).
  3. All disbursement requests from the SMT require receipts and/or invoices to process - A Trustee is legally required to keep accurate records and a detailed history of all disbursements.

SHOULD I USE A SMT?

A Settlement Management Trust can be an excellent tool to protect individuals who need financial protection from others or from themselves. A SMT can be used when an individual already has some form or health insurance, but needs a low cost non-profit trustee for fiduciary oversight. As Trustee, CPT Institute will ensure that all disbursements from the trust are in the best interest of the Trust Beneficiary.

Unlike a Special Needs Trust, a SMT does not protect government benefits such as Supplemental Security Income (SSI) and/or Medicaid. However, the SMT has “springing powers” (sometimes referred to as “trigger powers”) to become a Special Needs Trust if a Trust Beneficiary becomes eligible for SSI and/or Medicaid benefits.