First-Party Special Needs Trust
A first-party SNT can benefit individuals with special needs who can also qualify for public benefits.
Because they have been designed to work for one individual, the first-party SNT works a little like a personal health savings account: the SNT gets funded by the individual’s personal funds so they can use those funds later without losing their eligibility for government assistance programs like Medicaid.
Third-Party Special Needs Trust
In terms of creation and uses, a third-party SNT operates almost exactly like a first-person SNT. The primary difference comes from the trust’s funding source: a third-party SNT has to be funded by someone other than the beneficiary.
For example, if a grandparent sets up a third-party SNT for a disabled grandchild, the grandparent or another person would be responsible for funding the SNT. This provides a level of security between the beneficiary and the costs of their special needs. Third-party SNTs regularly appear in estate planning, as they allow you to set up a fund specifically to help an individual in the event your ability to make competent decisions becomes impaired.
Third-party SNTs have the benefit of flexibility: the funds have no limit in terms of applicable assets, they can be used for any of the beneficiary’s needs, and the government cannot claim any of the assets placed in the trust.
Why Use an Special Needs Trust
The largest benefit of an SNT might be the peace of mind they provide.
By taking the time to establish an SNT, the interested parties can make certain they have done everything they can to provide for the beneficiaries.
The SNT’s irrevocable status ensures another individual cannot attempt to rewrite the trust’s terms at a later date. A first-party SNT allows for a certain level of autonomy by the beneficiary; because they have to fund the SNT themselves, they can experience a level of self-governance and personal responsibility that may have been lost due to injury. Likewise, a third-party SNT allows the beneficiary to operate with less anxiety about personal finances.
To learn more about how to set up a Special Needs Trust or how it operates, consult with Johnstown Special Needs Planning Attorney, Dan Hill. Contact The Hill Group LLC today.