A special needs trust makes it possible to ensure money is appropriately managed for a person with a disability, who may be unable to manage money on his own or on her own. Not only does a special needs trust ensure that property and assets are wisely managed, but this unique type of trust can also be used to help preserve access to means-tested government benefits that are often received by people with disabling conditions.
Special needs trusts are very specific kinds of trusts, with strict rules that must be followed in order for the trust to provide the protection desired. There are also different kinds of special needs trusts, including first party special needs trusts and third party special needs trusts. Anyone who is giving a gift to someone with a disability or who is helping someone with a disabling condition to manage assets and preserve benefits access must know the rules for special needs trusts.
Mark S. Eghrari & Associates PLLC provides invaluable assistance with both first party special needs trusts and third party trusts. We represent people who are disabled, as well as friends and loved ones of people with a disabling condition. Give us a call today to find out more about how we can help you use trust law to protect benefits and assets.
A First Party Special Needs Trust vs. a Third Party Special Needs Trust
Both a first party special needs trust and a third party special needs trusts can involve structuring ownership of assets in order to ensure that the assets are not going to count as resources for purposes of qualifying for benefits like Supplemental Security Income (SSI) and Medicaid.
For a person whose disability prevents working, SSI may be the only source of essential monthly income. For any person with a disability who has routine medical needs, Medicaid may be the only affordable option for securing healthcare. Both SSI and Medicaid are means-tested and ownership of valuable assets can be disqualifying. When a special needs trust is created, the trust owns assets, not the person with special needs.
While first and third party special needs trusts serve the same purpose, there are important differences between the two types of trusts. First party special needs trusts are funded with assets which belong to the person with special needs, while third party special needs trusts are funded with assets that belong to someone else.
A first party special needs trust may be funded with money and property owned by the person with the disabling condition, such as funds received in a personal injury settlement after an accident resulted in a disability. With a third party special needs trust, on the other hand, the assets going into the trust never belonged to the person with the disabling condition- they belong to someone else who decides to make a gift to the person with special needs.
A third party special needs trust could be funded with money owned by a parent, friend, or relative of the person with special needs. Money could come from a life insurance payout, from a bequest in a will, or from an inter vivos gift. The money is transferred by its current owner into the special needs trust.
There are no limits to the amount of money transferred into third party special needs trusts. There is also no requirement that the state be reimbursed out of this trust for Medicaid payments after the death of the person with the disability who benefited from the trust. Money left after the death of the person with special needs can be bequeathed to whomever is desired by the person who originally created and funded the trust. With a first party special needs trust, on the other hand, the government can try to recoup money spent from the trust after the death of the person with the disability.
How a Special Needs Trust Lawyer Can Help
The creation of a special needs trust is one of the most important things that can be done to provide help for a person who is disabled and to achieve a secure future for someone with special needs. No matter where money and assets are coming from, it is essential to make sure they are managed by someone with the knowledge to protect property and investments. It is also essential to ensure that money and property do not cause loss of access to government benefits which are of vital importance to many people with disabilities.
Mark S. Eghrari & Associates PLLC understands the rules for special needs trusts and can explain the key differences between a first party special needs trust and a third party special needs trust. Give us a call today so we can begin helping you to use the trust laws to protect yourself and to protect your loved ones. You can reach us at (631) 265-0599 or contact us online to learn more about how an experienced lawyer can help you.