What is a Special Needs Trust
A Special Needs Trust (SNT) maintains the finances of a disabled individual who may need help managing them . Also, SNT allows the individual to continue to receive government benefits such as SSI and Medicaid/Medi-Cal. Creating a Special Needs Trust has many benefits but you must be aware of the different types of SNTs available. There are two types: First-Party Special Needs Trusts and Third-Party Special Needs Trusts.
First-Party Special Needs Trust
First-Party SNTs benefits the creator or Grantor of the Trust. At the time of creating an SNT, the Grantor must be under the age of 65 , and must meet the government’s definition of disabled.
The First-Party SNT is when a disabled person inherits money or property. Persons with assets and later becomes disabled seeking government help may find this helpful. The property funded into a First-Party SNT is for the sole benefit of the beneficiary of the SNT, which is the Grantor.
Any remaining assets is used to repay Medicaid/Medi-Cal, or other applicable government benefit programs when the beneficiary of the First-Party SNT dies. The amount to be reimbursed will be equal to the amount of funds that were provided from government benefits during the Grantor’s lifetime. Any unused assets are distributed to the ultimate beneficiary of the Trust after reimbursement.
Third-Party Special Needs Trust
Third-Party SNTs are created for the benefit of another individual. Unlike a First-Party SNT, Third-Party SNTs do not have an age restriction like the, but still need the beneficiary of the Trust to meet the government’s definition of disabled.
Grantors who make Third-Party SNTs include grandparents, parents, siblings, guardians, and conservators, to name a few. The Grantor of a Third-Party SNT is not required to be related to the beneficiary. A First-Party SNT repays the Medicaid/Medi-Cal when the beneficiary dies, but for a Third-Party SNTs it does not need to be repay. This preserves the assets of the beneficiary, which allows the Trustee to remain in full control. After the beneficiary of the SNT dies, the Trustee is able to allocate the remaining assets to any person(s) or charity designated in the Trust.
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Special Needs Trusts are excellent tools for anyone with a disability or special needs. SNTs allow the beneficiary to remain on government benefits during their lifetime. Furthermore, it allows acting as a placeholder for the beneficiary’s assets. There are advantages to each type of SNT. Remember, each Trust will only be effective if executed properly and based on the needs of the person the Trust will be created by or for. To find out which type of Special Needs Trust will benefit you, or someone you know, please schedule a consultation with our firm. We can help you create a Special Needs Trust that’s best for you!