What Is A First Party Special Needs Trust?Posted by smith clea on August 9th, 2022 Do you have questions about First Party Special Needs Trust? Here are the answers to your most common questions about First Party Special Needs Trust and how it works. Read on to learn more. Eligibility RequirementsIndividuals with disabilities who are under the age of 65 and who receive means-tested benefits, such as Supplemental Security Income (SSI) or Medicaid, are eligible to establish a first-party special needs trust. A first-party trust can also be established for the benefit of someone who is not yet disabled but who is expected to become disabled before reaching age 65. A first-party trust must be established for the sole benefit of the disabled individual. It cannot be used to benefit anyone else. The assets in the trust must be limited to those that have been legally transferred to it by the individual's parents, grandparents, legal guardians, or others entitled by law to provide funds for their care. Also, there can be no other restrictions on when or how these funds may be spent. The assets in this type of trust do not need to count against any public assistance programs that require participants either to pay money into them (such as Social Security) or spend down certain amounts from their resources each month. First-Party Special Needs Trust Vs. Third-Party Special Needs TrustA first-party special needs trust is created by the disabled person, while a third-party special needs trust is created by someone else, such as a parent or grandparent. The main difference between the two types of trusts is that with a first-party trust, the disabled person can still receive means-tested government benefits, whereas, with a third-party trust, they would not be able to. Once the property in a first-party trust is depleted, it ceases to exist and any remaining funds are used for another purpose. On the other hand, there may be occasions when a third-party trust cannot be terminated because of an ongoing need for care. Additionally, third-party trusts allow disabled persons to continue receiving means-tested government benefits so long as they qualify. In general, a first-party trust is better if you want to keep eligibility for means-tested government benefits. Who Is The Trustee?The trustee of a first-party special needs trust is typically the parent, grandparent, or other close relatives of the disabled person. The trustee manages the trust on behalf of the beneficiary. He is responsible for investing the assets and using them to pay for the beneficiary's supplemental needs. However, since the trustee also has legal authority over all decisions related to the trust, it can be difficult for the beneficiary to access any funds outside of what is deemed allowable expenses. These expenses are set by state law and usually include things like housing costs, personal care needs (including medical care), clothing, education tuition (if not covered by public programs), and out-of-pocket medical expenses that are not covered by insurance. Other Types Of Special Needs TrustsThere are other types of special needs trusts, such as third-party special needs trusts and pooled trusts. Third-party special needs trusts are created by someone other than the beneficiary, such as a parent or grandparent. Pooled trusts are managed by a non-profit organization and pool the assets of multiple beneficiaries. About The AuthorClea Smith is a USA-based author on Legal issues related to estate planning, will & trust, business law, and elder law. Clea Smith does her best writing on these topics that help users to find the best solutions to their FAQ on estate planning attorney, probate, living trust vs will, and more about legal family issues. Like it? Share it! More by this author |