First-party and third-party special needs trusts protect benefit eligibility
Individuals with special needs often depend on government benefits in order to afford things that many of us take for granted — including health care, education, healthy food and a safe home. But when someone with special needs acquires significant assets for any reason, their eligibility for government benefits may be jeopardized. Special needs trusts hold these assets outside the ownership of those individuals, but allow the money to be spent on their behalf, thereby enriching their lives without endangering their eligibility for benefits.
A third-party special needs trust is the most common type. The trust is created by a third party, using that person’s assets, and names the special needs individual as the beneficiary. These assets are commonly transferred into the trust upon the death of the trust’s creator, or grantor, through a will, life insurance or beneficiary designation.
Less widely known, but equally important, are first-party special needs trusts. Such a trust is created by the special needs individual, using his or her own assets for his or her own benefit. These assets could be the result of a personal injury award, a divorce settlement, a life insurance policy or other circumstances.
In both cases, the trustee — the individual in charge of administering the trust — uses the funds within the trust to support the person with special needs. The rules governing the trust’s expenditures must be followed closely, as any improper use of the funds could endanger government benefits. But the rules do allow a wide variety of life-enriching purchases, including personal services, hobbies, luxury items and vacations.
There are many different varieties of trusts. The help of an experienced special needs attorney is very important in properly creating and administering a special needs trust.
The elder law attorneys at Hook Law Center assist Virginia families with will preparation, trust & estate administration, guardianships and conservatorships, long-term care planning, special needs planning, veterans benefits, and more. To learn more, visit https://www.hooklawcenter.com/ or call 757-399-7506.
Posted in Medicaid