A first party special needs trust is a type of legal structure that can be used to benefit a person with a disability who is enrolled in government benefit programs. Many people with disabilities rely on Medicaid as a source of health insurance, and Supplemental Security Income can provide the basic necessities.
Since these programs are intended for people with financial need, you have to be able to prove that you have limited resources in your own name if you want to qualify. People with significant resources cannot obtain eligibility.
In many cases, people with disabilities do not have their own resources, because they cannot earn much income. As a result, they can demonstrate financial need. However, in other instances, someone with a disability may come into some money. The individual could receive an inheritance or insurance policy proceeds, and some people with disabilities receive personal injury settlements.
Under these circumstances, a legal guardian, a parent or a grandparent could use the funds to establish a first party or self-settled special needs trust for the benefit of the person with special needs. When this type of trust has been established, the trustee can use assets in the trust to satisfy the supplemental needs of the beneficiary without interrupting benefit eligibility.
What are supplemental needs? The government benefits will cover some needs, but not everything. Supplemental needs would be needs that are not being met by the benefits. As long as the expenditures are within the rules, benefit eligibility would not be impacted.
Though this is a positive arrangement, there is one drawback. After the death of the beneficiary, the Medicaid program would seek reimbursement from his or her estate.
If a special needs trust is created with funding that is coming from someone other than the beneficiary, it is considered to be a third party special needs trust. The same situation would exist with regard to the ability of the trustee to use the trust’s assets to satisfy the supplemental needs of the beneficiary.
However, Medicaid would not seek reimbursement from the estate of the beneficiary after his or her passing.
Special Needs Planning Report
You should act in a fully informed manner if you have a person with special needs in your family. Benefit eligibility can be essential, so you have to take all the right steps.
We have prepared an in-depth report that puts the subject of special needs planning under the microscope. This report will provide you with a great deal of valuable information about these complex benefit programs, and it is being offered free of charge at the present time.
To get your copy of the report, visit this page and follow the simple instructions: Rochester NY Special Needs Planning.
Michael Robinson, Estate Planning Attorney
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