Blogs :: Special Needs Trusts - An Overview

There are two types of Special Needs Trusts used for assets of individuals with Special Needs. Which one you create is dependent on the source of the assets: either the individual’s own assets or those that are given to the individual by another person. The purpose of these trusts is to protect the financial assets of a disabled beneficiary as well as provide for the individual’s future needs. As there is a limit on the amount of assets an individual with Special Needs can own, having a Special Needs Trust can hold their assets without jeopardizing government benefits.

First-Party Special Needs Trust

First-Party Special Needs Trusts are often used for an individual with Special Needs’ own money from an inheritance, received in a court settlement or a divorce settlement. In these cases, the assets would be put into the First-Party Special Needs Trust so the individual will qualify for government benefits since there is an asset limitation that comes with public benefits. This type of Trust is funded with assets that belong to the individual. Assets inside this Trust can be used only for the “sole benefit” of the beneficiary and are subject to Medicaid payback.

Third-Party Special Needs Trust

Third-Party Special Needs Trusts are designed so loved ones can leave money to the beneficiary with Special Needs. The Trust is typically funded upon the death of the individual’s parents or loved ones who wish to leave funds to the individual with Special Needs. For example, cash, assets from the sale of the parent’s home, gifts from grandparents or the parent’s life insurance policies are all funds that can be deposited into the Third-Party Special Needs Trust. It is important to advise your relatives who may want to leave money to your child that they must make the Third-Party Trust the beneficiary of their assets. Once the original beneficiary dies, the Trust will be distributed to the successor beneficiaries named in the Trust and is not subject to Medicaid payback. 

Special Needs Trusts are typically irrevocable which means that it cannot be revoked and can only be amended or terminated under specific circumstances provided within the Trust.

It’s important to note that there is specific verbiage that must be in Special Needs Trusts and that not every Trust qualifies as a Special Needs Trust. If your currently have a Trust and are not sure it is correctly worded, it can be reviewed and modified or revised, if necessary.

To arrange a consultation with an attorney, contact Boyd Handley at The Handley Law Office: 281.703.3616 or Boyd@TheHandleyLawOffice.com.

 

See More Blogs