It is not uncommon for individuals to receive money through gifts or inheritance. In some instances, the intended beneficiary of these funds has special needs. When this is the case, it may be appropriate to set up a third party special needs trust to administer the assets. This can be an excellent way to help protect your loved ones’ eligibility for needs-based programs like Medicaid and SSI.
In order to set up a third party special needs trust, you will first need to find an attorney who specializes in trusts and estate planning. You will want to make sure that the attorney you work with has experience with special needs trusts.
Then, you will need to gather all necessary information about the assets of the trust and the intended beneficiary. This may include identifying where any assets are currently located, how they were obtained, and what their value is. You will also need to gather background information about the beneficiary of the trust, including their current income level as well as their medical history and diagnosis.
Once you have gathered all necessary information about both parties involved in your special needs trust, you can meet with your attorney.
A third-party special needs trust is a trust established by someone other than the beneficiary of the trust. This type of trust, also known as a supplemental needs trust, allows a person (the grantor) to create a fund that is used to supplement the public benefits received by someone (the beneficiary) with special needs.
A third-party special needs trust protects the assets in the trust from being counted as an asset of the beneficiary for purposes of determining eligibility for Supplemental Security Income (SSI) and Medicaid. The assets held in these types of trusts are not considered countable resources for purposes of determining SSI or Medicaid eligibility.
Typically, parents, grandparents and other close relatives establish third-party special needs trusts to provide for their disabled loved ones after their death. The money in this type of trust is paid out only for things that would complement and supplement what government services already provide. Parents who are worried about losing Medicaid coverage for their disabled children may want to consider this type of trust as well.
A third-party special needs trust is a legal document that allows a third party—such as a family member or friend—to set aside funds for the care of a person with special needs without interfering with his or her eligibility for government benefits like Medicaid and Supplemental Security Income (SSI). The beneficiary will receive any income from investments made through his or her trust account but won’t have access to principal unless it’s deemed necessary by the trustee.
The first step in creating this type of trust is finding someone who will act as your agent for managing all financial decisions related to caregiving costs; this person may also be referred to as a “guardian,” “executor,” or “trustee.”
Third party special needs trusts are irrevocable and can be set up by anyone. They are called “third party” because they are funded by someone other than the disabled beneficiary. The reason to set up this type of trust is to protect assets that would otherwise count against the beneficiary when applying for certain benefits, such as Medicaid.
If you have a child with special needs, you may want to start putting money into a third party special needs trust. This money could go towards things that the government does not pay for, such as educational opportunities, medical care, recreation, and so on. You might worry that having money in your child’s name will disqualify them from receiving government benefits or interfere with their eligibility.