What Is a "Third-Party" Special Needs Trust and How Is It Different From Other Kinds of Trusts?
Third-party special needs trusts, as the name implies, are funded with assets that never belonged to the trust beneficiary...
Read moreA Special Needs Trust (SNT) can play an important role in preserving the financial security and lifestyle of a person with special needs. A properly drafted SNT allows the individual to benefit from supplemental resources while still qualifying for public benefits, such as Supplemental Security Income (SSI) and Medicaid. Generally, when a parent or guardian wishes to establish and fund a trust for the benefit of a minor child, the attorney recommends a "third-party" SNT be set up for the child. But, when the person with special needs has his or her own assets, another option may be more appropriate: the "first-party" or "self-settled" SNT.
What Is a First-Party SNT?
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Like a third-party SNT, the first-party trust is designed to benefit individuals with special needs who qualify - or expect to one day require - public benefits that are available only to people with limited resources. Both third- and first-party SNTs allow assets to be set aside for "supplemental" expenses not covered by SSI or other resources. For example, a trustee can distribute SNT funds to pay for education expenses, a vacation or hobbies, but not for food or shelter, which are covered by SSI.
What differentiates a first-party SNT is the following:
When Is a First-Party SNT Appropriate?
A first-party SNT may be desirable when an individual with special needs has assets - or expects to receive assets - that would disqualify him or her from eligibility for public benefits. Some examples include:
Because each situation is unique, it is important to discuss the best alternative with a knowledgeable special needs attorney.
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