There are different types of special needs trusts. One of them is the first party or self settled special needs trust. With this type of trust, the funding would be coming from the beneficiary. Sometimes a disabled individual will receive a personal injury settlement, and the settlement could be used to fund a first party special needs trust.
The government benefit programs that we are referring to are Medicaid and Supplemental Security Income. Medicaid is a need-based health insurance program that is administered by the federal government along with each respective state government. As the name would suggest, Supplemental Security Income is a source of income for people with disabilities who cannot earn much on their own.
Since these programs are based on financial need, you cannot qualify if you have significant resources in your own name. When assets have been conveyed into a first party special needs trust, benefit eligibility would not be impacted. The beneficiary could not directly spend money in the trust, but the trustee could use the assets to satisfy some of the beneficiary’s unmet needs.
A first party special needs trust could protect a personal injury settlement to some extent. However, when this type of trust has been established, the Medicaid program would seek reimbursement from the estate of the beneficiary after his or her passing. Assets that remain in the trust would be in play during Medicaid recovery efforts.
There is another type of special needs trust called a third party special needs trust. Everything is the same with regard to the ability of the trustee to use assets to satisfy the supplemental needs of the beneficiary without causing a loss of government benefit eligibility.
There is one major difference. With this type of trust, the funding would be coming from someone other than the beneficiary. As a result, Medicaid could not go after the assets that remain in the trust after the death of the beneficiary.
Special Needs Planning Report
We have provided a bit of basic information in this brief blog post. If you would like to obtain more detailed information about special needs planning, download our comprehensive report on the subject. This report will answer most of your questions, and it is being offered to our readers on a complimentary basis right now.
To obtain your copy of the report, visit this page and follow the simple instructions: Free Report on Special Needs Planning.
If you would like to take things a step further, send us a message through this page to set up a free consultation: Grand Forks ND Special Needs Planning.