Which is the Right Special Needs Trust for You?

Let’s first discuss, what is a trust? A trust is a legal arrangement in which a trustee holds and manages assets for the beneficiary. A trustee is the person or entity which manages and administers the trust. The beneficiary is the person or entity that receives the trust assets.

A Special Needs Trust, also referred to as a Supplemental Needs Trust or “SNT”, is a type of trust that is intended to preserve the eligibility of individuals with specials needs for government needs-based programs such as Medicaid and Supplemental Security Income (SSI), as well as protect their individual assets that are used to supplement their lives. The rule of Special Needs Trusts is that the trustee can only supplement the beneficiaries’ government benefits, not supplant them. Therefore, planning special needs trust is a bit more complex than your typical trust. There are two main types of special needs trust: a first-party special needs trust, and a third-party special needs trust.

A first-party special needs trust, also known as a “self-settled” trust, is funded with only personal assets from the individual with the disability – who is also known as the trust beneficiary. The trust can also be funded with an inheritance of money or property. Most importantly the beneficiary must be under the age of 65 when the trust is created and funded, and the trust must be irrevocable. After the beneficiary’s death, Medicaid is first reimbursed prior to anyone else listed as a beneficiary under the trust.

A third-party special needs trust is created by parents, guardians, and grandparents planning in advance for the benefit of their loved ones with special needs. Third-party special needs trusts can be created under a Will or as a subtrust within a Living Trust, or it can be a stand-alone trust. Typically, this trust is funded with inheritance, gifts, or proceeds of life insurance; there is no limit as to amount. As opposed to a first-party special needs trust, after the beneficiary’s death, the government has no entitlement to the trust assets. The money that remains following the beneficiary’s death, will pass to the successor beneficiaries name by the parent, guardian, or grandparent in the trust document. Additionally, a third-party special needs trust need not be irrevocable.

As you can see there are several factors to consider when setting up a special needs trust and strict rules governing the administration of these trusts. It is best to consult with an attorney who practices in this area to be sure you have a full understanding all of your options.  For additional information about Asset Protection Planning, contact The Presser Law Firm, P.A. for a complimentary preliminary consultation. The Presser Law Firm P.A. 6830 N. Federal Highway, Boca Raton FL 33487 (561) 953-1050 or email info@assetprotectionattorneys.com.