What is a Special Needs Trust?
A Special Needs Trust also called a supplemental needs trust allows for your special needs loved one to receive gifts, an inheritance, or other funds to provide supplemental care, life-enhancing services and equipment beyond what the government provides. This can be before or after they turn 18. A Special Needs Trust directs the funds so that the funds are not considered to belong to your loved one when they apply for government programs, such as Medicaid and Social Security Income (SSI).
Types of Special Needs Trusts
The 3 main types of Special Needs Trusts include first-party special needs trust, third-party special needs trust, and pooled trust.
First Party Trust
A First Party Special Needs Trust is put in place to ensure your loved one maintains his or her government benefits (Medicaid and Supplemental Income). The First Party Special Needs Trust is available if your special needs loved one is under the age of 65. The assets in the Trust will contain the assets of your loved one for their benefit only. Any assets in the First Party Special Needs Trust and any interest accrued by those assets would be reserved for supplementing rather than replacing government benefits. The Trust will include a plan for paying back any Medicaid benefits received by the State.
Third Party Special Needs Trust
While a Third Party Special Needs Trust is structured to supplement your loved one’s needs, unlike First Party Trusts, a Third Party Trust is funded with Third-Party assets. Further, it does not require a plan for paying back any Medicaid benefits received by the State. Life insurance policies can be used to fund these Trusts, as well as gifts or bequests, made at the time the Trust is set up or in the future.
A pooled trust is created by a Non-Profit/Charity Organization. It is an alternative to setting up a First Party Special Needs Trust. With this type of Trust, beneficiaries can pool assets with assets from other trust beneficiaries for investment purposes, while maintaining separate accounts for each beneficiary’s needs. When the beneficiary dies, the funds remaining in the account reimburse the government for any Medicaid benefits that have been paid out, but a portion also goes towards the non-profit organization that is responsible for managing the Trust.
DiFranza Law is Here for You
Estate planning for a loved one with special needs involves numerous factors to ensure the best quality of care throughout their life. Lisa DiFranza offers estate planning services, including Special Needs Trusts for clients in Florida. Schedule a consultation today.