In the field of estate planning, there are numerous different trusts that can be utilized. The proper choice will depend upon the circumstances. With this in mind, we will look at the value of third party special needs trusts in this blog post.
Funding the Trust
You would use a third party special needs trust if you wanted to provide for a loved one with a disability who is relying on need-based government benefits like Medicaid and Supplemental Security Income. A direct gift or inheritance could result in a period of ineligibility.
On the other hand, if you create and fund a third party special needs trust, you would name a trustee to administer the trust. The beneficiary would be the loved one with special needs that you want to assist. Under benefit program rules, the beneficiary could not directly control or access the funds in the trust.
However, the trustee could use the assets to make purchases that meet some of the beneficiary’s needs. As long as the expenditures were within the guidelines, eligibility for the benefits would not be impacted.
The trust is called a third party special needs trust because the funding is coming from a third party; it is not coming from the beneficiary. When this type of trust is in place, Medicaid would not look for reimbursement from the estate of the beneficiary after his or her passing.
It is possible for a parent, grandparent or legal guardian to use assets that are the property of a disabled person to fund a first party special needs trust. Everything would be the same with regard to the ability of the trustee to use assets in the trust to improve the beneficiary’s quality of life without impacting benefit eligibility.
The major difference would be that the Medicare program would seek to attach assets that comprise the estate of the beneficiary after his or her death.
Learn More About Special Needs Planning
You should certainly act in a fully informed manner if you want to set aside resources for the benefit of a loved one with special needs who is enrolled in government benefit programs. The rules can be complex, and a misstep could yield unintended negative consequences.
We have prepared an in-depth special report that you may want to access if you are interested in special needs planning. This comprehensive report will provide you with a great deal of very useful information, and it is free to our readers.
To obtain access to your copy of the report, click this link and follow the simple instructions: Southampton PA Special Needs Planning.
Free Consultation
If you would like to take things a step further, send us a message through this link to set up a free consultation: Bucks County PA Estate Planning Attorneys.
Joe Masiuk, Estate Planning Attorney
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