There are two different types of special needs trusts. Self-settled trusts are often used for personal injury settlements, while third-party special needs trusts are set up through a third party. The main difference between self-settled trusts and third-party special needs trusts is that a self-settled trust must repay Medicaid for lifetime payments. A third-party special needs trust, on the other hand, does not need to repay Medicaid for lifetime payments to the beneficiary.
A special needs trust provides additional control over finances for a beneficiary. A special needs trust may be combined with an ABLE account, allowing the beneficiary to have more control over their finances. Special needs trusts are ideal for people with disabilities or limited incomes, because the assets are tax deductible and protected from creditors. Furthermore, they enable caretakers to ensure that long-term care for their loved one will be provided regardless of the beneficiary’s current health. However, they have substantial costs to establish and maintain, and therefore, you may wish to work with a trusted estate planning attorney.
The first-party SNT is set up by the beneficiary, while the third-party SNT is set up by a family member or third-party. Often, these trusts are used in lawsuits to protect a disabled person from losing benefits, which are often awarded as a result of a settlement. First-party SNTs are named after 42 U.S.C. SS 1396p(d)(4)(C) and (d)(4)(A) respectively.
Self-settled special needs trusts are usually created by disabled individuals who have less than $2,000 in assets. In contrast, pooled trusts are set up by a third-party with assets owned by other individuals. Third-party trusts are more flexible and can include provisions for siblings and assets to be distributed to designated beneficiaries. You can create one or both types of special needs trusts. They are equally important in the situation of disability.
Generally, there is no limit on the size of a third-party special needs trust. The funds are available to the beneficiary for virtually any purpose. These funds can supplement government benefits, like Medicaid or disability insurance, or can be used for personal needs, such as vacations. In the event that the beneficiary dies before the assets are distributed, the remaining assets can be passed to other family members. You can choose to use the funds from the trust to pay for medical expenses or assist them with daily living expenses.
Third-party special needs trusts are created by someone other than the beneficiary. Third-party special needs trusts can be created with assets owned by someone other than the beneficiary. This type of trust is often used when someone planning ahead wants to provide the disabled person with financial resources after they pass on. So, a third-party special needs trust can benefit from a variety of assets, such as retirement accounts, life insurance policies, and real estate.
The supplemental needs trust, also known as a special needs trust, is a private funding source managed by a trustee. The funds in these trusts are intended to supplement public benefits and help the disabled person maintain the same quality of life. Some examples of the supplemental needs trust’s use are wheelchairs, handicapped vehicles, beds, attendants, and recreational activities. You can use a special needs trust to protect your disabled loved one’s government benefits.