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What is a Special Needs Trust?

Definition– a trust that is set up for a person with special needs to supplement any benefits the person with special needs may receive from government programs. Allows the beneficiary to receive government benefits while still receiving funds from the trust. There are three types of special needs trusts: first-party trust, third-party trust, and pooled trust. Sometimes a special needs trust will be abbreviated SNT.

 

  • A first-party SNT holds assets that belong to the person with special needs. Funds are used for the beneficiaries benefit while they are living, and when the beneficiary dies, any assets remaining reimburse the government for the cost of medical care.
  • A third-party SNT holds funds belonging to other people who want to help the person with special needs. When the beneficiary with special needs dies, any funds remaining in the trust can pass to other family members, or charity, without having to reimburse the government.
  • A pooled trust holds funds from several different beneficiaries with special needs. A charity sets up these trusts that allow beneficiaries to pool their resources for investment purposes, while maintaining separate accounts for each beneficiary’s needs. When beneficiary dies, the funds remaining in her account reimburse the government for her care, but a portion also goes towards the non-profit organization responsible for managing the trust.

 

  • a trust that is set up for a person with special needs to supplement any benefits the person with special needs may receive

 

What It Really Means

This type of trust is specifically tailored to a person with special needs so that they can continue to receive government benefits, while also receiving benefits from the trust in which they are a beneficiary.

 

Example

  • First-party SNT: Beneficiary receives benefits under Supplemental Security Income (SSI), which is a government program assisting special needs people with low incomes. To qualify for SSI, a person can only possess $2,000 in his own name. If a person has more than $2,000 in their name, a first-party special needs trust allows them to qualify for SSI benefits, and the property placed within the trust is not technically classified as within their possession.
  • Third-party SNT: These can hold any kind of asset (ex. House, stocks, investments), and are most used by family members to assist a person with special needs. A parent could set up a special needs trust to care for a child who is disabled, to make sure that child is taken care of after the parents pass away.
  • Pooled trust: The Weil Law Group represented special needs client under 65 years old who was receiving SSI and Medicaid, who received an inheritance from her parents of $50,000. The Weil Law Group established a pooled trust account to hold the inherited funds so that the client could continue to qualify for SSI and Medicaid. The funds in the pooled trust account may be used for goods and services that SSI and Medicaid do not cover (ex. Dental care).

 

 

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