For many families, a Special Needs Trust also known as Supplemental Needs Trust is the most effective way to help their family member with a disability. A Special Needs Trust manages resources (assets and income) intended to enrich the life of a loved one with special needs, while also maintaining a person’s eligibility for government benefits.
There are two types of Special Needs Trusts:
First Party Special Needs Trusts are funded with assets owned by the trust beneficiary. A first party SNT also known as a Medicaid payback trust or a self-settled Trust is established to protect current or future eligibility for government benefits if an individual is about to receive a settlement, inheritance or other monies that will bring his or her countable assets to more than $2,000.
Third Party Special Needs Trust are funded with assets that are owned by parents, relatives or friends, but not assets owned by the trust beneficiary. Third party SNTs are an ideal estate planning vehicle for parents and other friends and relatives who want to leave an inheritance to an individual with disabilities. One of the things that parents of children with disabilities worry about most is what will happen to their child when they die. Not only will a third party SNT shelter an intended inheritance, it can be used during the parents’ lifetimes for ongoing expenses that are not covered by government entitlements.
Without a Special Needs Trust, if a disabled SSI/Medicaid recipient receives a personal injury award, inheritance or has any assets in excess of $2,000, they will lose their much needed government benefits.