A Special Needs Trust allows a person with a disability to receive essential government benefits such as Medicaid and Supplemental Security Income while also being able to benefit from assets held in the trust. There are two types of special needs trusts, a first-party trust, and a third-party trust.
A first-party special needs trust also called a “self-settled trust,” is established by the individual with a disability who is also the trust’s beneficiary. For the assets included in a first-party trust not to count for Medicaid or Supplemental Security Income, it is required by law that the trust must be created and funded while the beneficiary is under the age of 65. The trust must also be irrevocable and provide that upon the death of the beneficiary, that Medicaid will be reimbursed. Finally, the trust must also be administered solely for the benefit of the beneficiary. Typically with a first-party social needs trust, the funding comes either from a personal injury settlement or an inheritance directly received by the beneficiary.
A third-party special needs trust, also known as a “supplemental needs trust” is funded with assets not belonging to the beneficiary, and no assets belonging to the beneficiary can be used to fund the trust. Typically, funds come through inheritance, and proceeds of life insurance policies. A third-party special needs trust has no provision to repay Medicaid upon the termination of the trust, but instead, the person who created the trust chooses how it is distributed upon the death of the beneficiary.
Tresp Law, APC has two locations in Southern California and a team of experienced attorneys to represent you in estate planning, administration, and trust and estate litigation. Call Tresp Law, APC today at (858) 248-2779, or click below to schedule a consultation.
