The 3 main types of special needs trusts are first-party trusts, third-party trusts, and pooled trusts. Each of these trusts is designed to benefit one or more people with special needs while protecting their eligibility for important government benefits, like Supplemental Security Income (SSI) and Medicaid.
First-Party Special Needs Trusts
In a first-party special needs trust, the person with special needs owns the assets in the trust. People with special needs may put their assets into a first-party special needs trust, so they can continue receiving SSI and Medicaid benefits and use the money in their trust when they need it.
If a person with special needs has more than $2,000 in their name, they will no longer qualify for SSI. For this reason, many people with special needs put their savings, inheritance, and accident settlements into first-party special needs trusts.
Please note that first-party trusts contain a “payback” provision, so any funds that remain in the account after the individual with special needs dies can be used to reimburse the government for benefits issued while the individual was alive.
Third-Party Special Needs Trusts
Third-party special needs trusts are most common among family members of people with special needs. These trusts hold funds belonging to people who wish to help an individual with special needs. For example, a mother might open a third-party special needs trust to care for her child with special needs.
A third-party special needs trust can hold any kind of asset, and it will not affect the individual with special needs’ eligibility for SSI and Medicaid benefits. Third-party special needs trusts do not have payback provisions, so if the person with special needs dies, the individual who owns the assets can reallocate the trust to other family members – or to charity.
Pooled Special Needs Trust
Charities usually handle pooled special needs trusts. In a pooled trust, multiple beneficiaries will pool their resources to meet each beneficiary’s needs. Although each beneficiary will have their own account, the funds remaining when the beneficiary dies will help the charity operate in the future.
Pooled trusts also invest beneficiary assets to help ensure each beneficiary can afford the care they need. Like other special needs trusts, pooled trusts do not interfere with SSI benefits. They are, however, subject to the “payback” provision. With smart investments, however, charities can continue operating on the donations they receive after reimbursing the government.
Which Trust Is Right for Me?
All 3 types of special needs trusts can be extremely beneficial for individuals with special needs and their families and caretakers. Choosing the trust that is right for you will largely depend on your unique situation.
If you are a parent or a caretaker, for example, a third-party special needs trust may be a good idea, but if you are a young person with special needs striving for independence, a first-party special needs trust might be the best option.
Losavio & DeJean, LLC cannot only help you choose the trust that best fits your circumstances, but we can also help you set up your trust of choice. From choosing a trustee to drafting the paperwork, we have you and your family covered.
Our attorneys have over 40 years of specialized experience with a care manager and registered nurse on staff – and we offer complimentary phone consultations to help you get started.
We want to hear from you, and we want to help – call us at (800) 835-5864 or contact us online to start building your special needs trust today.