A first-party special needs trust (also known as a self-settled special needs trust) is designed to hold the assets of a person with special needs, allowing them to maintain eligibility for public benefits like Supplemental Security Income (SSI) and Medicaid. Here’s a detailed list of how a first-party trust can be used:
1. Funding Sources
- Personal Injury Awards: Funds from a personal injury settlement can be placed into the trust to avoid disqualification from public benefits.
- Retirement Plans: Assets from retirement plans can be transferred to the trust.
- Divorce Settlements: Alimony or lump-sum payments from a divorce settlement can be directed into the trust.
- Life Insurance Policies: Proceeds from life insurance policies can be placed into the trust.
- Inheritances: Any inheritance received can be added to the trust to prevent loss of benefits.
2. Permissible Uses
- Supplemental Needs: The trust can cover expenses not provided by public benefits, such as education, hobbies, and vacations.
- Medical and Dental Care: It can pay for medical treatments, dental care, and specialized therapies not covered by Medicaid.
- Personal Services: Funds can be used for personal care attendants, housekeeping, and other personal services.
- Transportation: The trust can cover the cost of transportation, including the purchase and maintenance of a vehicle.
- Adaptive Equipment: It can be used to buy adaptive equipment like wheelchairs, communication devices, and home modifications.
- Recreational Activities: The trust can fund recreational activities and social events to enhance the beneficiary’s quality of life.
3. Trust Management
- Trustee Responsibilities: The trustee manages the trust assets and ensures they are used in accordance with the trust’s terms and government regulations.
- Irrevocability: The trust must be irrevocable, meaning it cannot be changed or terminated once established.
- Age Requirement: The beneficiary must be under 65 years old when the trust is established.
- Medicaid Payback: Upon the beneficiary’s death, any remaining assets in the trust must be used to reimburse the state Medicaid agency for benefits provided.
4. Benefits Preservation
- Public Benefits Eligibility: By placing assets in the trust, the beneficiary can maintain eligibility for SSI and Medicaid.
- Quality of Life: The trust allows for the enhancement of the beneficiary’s quality of life without jeopardizing their access to essential public benefits.
Would you like more information on any specific aspect of first-party trusts? https://www.specialneedstrustsonline.com