First Party Special Needs Trust

Securing the Future, Empowering the Present

What is a First Party Special Needs Trust?

A first-party Special Needs Trust is a trust that is used when the person with a disability who is receiving government benefits such as SSI comes into money in their own name. This can happen as a result of a lawsuit where the person with a disability Receives a settlement from a lawsuit, or inherits money in their own name. this type of trust can be used to Allow a person who has Assets in their own name and then becomes disabled to qualify for SSI or other governmental benefits. The first party Special Needs Trust is authorized under 42 U.S.C. § 1396p(d)(4)(A).

For any person with a disability who needs to qualify for governmental benefits even if they have Assets in their own name, it is important to explore these options to maximize government benefits and maintain a high quality of life.

A major difference between a first-party trust and a third party Trust is that on the death of the beneficiary the first party trust requires a payback to State Medicaid services of any assets remaining in the trust. a third party Trust does not have this requirement. on the death of the beneficiary of a third party Trust the assets Can be distributed to the beneficiaries heirs or transferred per the terms of the trust.

The Benefits of a First Party Trust

Shelter Assets From Government Benefits

The first party Trust allows a person to qualify for government benefits when they have Assets in their own name. this can be when the person with a disability comes into money in their own name either by inheritance or a lawsuit, etc or when a person with assets becomes disabled. having a first party trust allows them to qualify for government benefits and still retain their assets.

Protect Assets From Creditors

The first party Trust Will protect assets in the trust from creditors.

When A First Person Trust Comes In Handy

Real Examples Of First Party Trust Uses

Alex, a person with special needs requiring ongoing medical care and specialized therapies. To secure a financially stable future without compromising eligibility for government benefits, Alex’s parents establish a First Person Special Needs Trust. This trust, managed by a trustee, allows funds to be used for additional quality-of-life enhancements beyond what public benefits cover, such as specialized treatments and adaptive equipment. By carefully adhering to legal requirements, the trust safeguards Alex’s financial interests and ensures ongoing support, even in the absence of his parents, through the appointment of a successor trustee. This example highlights the practicality of a First Person Special Needs Trust in securing the well-being of individuals with special needs.

When Do You Use A First-Person Special Needs Trust

Receiving an Inheritance

If a person with a disability is receiving Assets in their own name, they need a first party Special Needs Trust to ensure that they can continue to receive governmental benefits.

A Settlement From A Lawsuit

If a person with a disability who is collecting government benefits receives a settlement in their own name as a result of a lawsuit the first party Trust can enable them to still collect government benefits and retain And use the settlement proceeds.

In A Divorce Settlement

If a person with a disability receives a divorce settlement, that settlement can be put into a first-party Special Needs Trust, and still allow that person to collect government benefits.

Any situation in which a person with a disability comes into assets and still wants to continue to receive Government benefits.

The first party trust is used anytime a person with a disability who is reliant on government benefits comes into Assets in their own name, however that may be. by the creation of a first-party trust the beneficiary, person with a disability, is able to retain the benefit of their own money as well as Government benefits.

Difference between a First Person Trust & a Third Person Trust

First Party Trust

The first party Trust is used when the person with a disability receiving government benefits comes into money in their own name whether it is from settlement of a lawsuit or an inheritance or any other means. by using the first party Trust they can put assets into the trust that they want protected So they may continue receiving governmental benefits.

Third-Person Trust

A third party trust is created by someone other than the person with a disability. the third party trust is usually created by the person with a disabilities parents or grandparents. once the trust is created money belonging to other people can be put into this trust to supplement government benefits so the individual with a disability can retain their government benefits and still have the use of the money given to them into the trust.

Important Provisions of First Party Trust

One significant provision that must be included in a first-person trust is a Medicaid payback provision. This provision requires that any funds remaining in the trust at the time of the individual’s death be used to repay Medicaid for any benefits paid on their behalf. This provision ensures that the government is reimbursed for the cost of the individual’s care and that any remaining funds are distributed to the person’s estate.

Are You Eligible For A First-Person SNT?

This Trust MUST Be Funded With A Disabled Person’s Assets

When a person with a disability either has Assets in their own name or comes into Assets in their own name the first party trust is the way to protect those assets and still continue to receive government benefits. most people think that when you receive money in your own name and your receiving government benefits there is nothing you can do. this is absolutely wrong because you can create a first-party Special Needs Trust to protect those assets and either start receiving government benefits or continue receiving government benefits and have the benefits of those assets.

Other Qualifications

Must be established by a parent, grandparent, or guardian

The first party trust can be established by the person with a disability (or their attorney-in-fact with the specific power to do so), their parent, grandparent, court appointed guardian or a court.

Must be irrevocable

The first party trust must be irrevocable, meaning once it is created it cannot be changed.

The beneficiary’s assets must be used to fund the trust

The purpose of a first-party trust is to protect assets that belong to the person with a disability.If there are assets that do not belong to the person with a disability they are best served by being placed in a third party trust.

The trust must be established before the beneficiary turns 65

The first party trust can only be established before the person with a disability turns 65. after 65 this vehicle is no longer available to the person with a disability.

Attorneys typically charge in excess of $3,000 for these same documents.

Book a free consultation to learn more about how my services can help you provide financial protection for a child with special needs.

Managing a First-Person Special Needs Trust

There are significant responsibilities for the trustee of a first-party trust. the trustee must pay for goods and services that are not provided by government benefits directly. the trustee must not provide cash to the individual with a disability. in addition the trustee is responsible for all record keeping to show what the assets of the trust were used for to provide support for the person with a disability.

The trustee under a first-party trust typically would hire accountants, banking professionals, or attorneys, to help them facilitate their role as trustees under the first party Trust.

It is critically important that the trustee allow government benefits to pay all expenses first for the person with a disability before the trustee uses trust funds to support the person with a disability.

Frequently Asked First Person Trust Questions

What Does SNT mean in a trust?

The term S&T refers to a special needs trust, also known as a supplemental Needs Trust.

What is another name for a special needs trust?

Special needs trusts are also known as supplemental needs trusts or SNT. It is a type of irrevocable trust providing numerous benefits. It allows people with disabilities who receive government benefits to continue to be able to receive government benefits while allowing them to use the assets in the trust to supplement those government benefits.

What are the pros and cons of having special needs trust?

Pros

Asset management
Maximizing/maintaining government benefits
Protection from creditors
Allows people retain their expected lifestyle by utilizing government benefits and other assets

Cons

Lack of control, Trustee would control all money
More complex record keeping
Difficulty identifying an appropriate trustee.
Cost of setting up the Trust

Will Income from a trust affect my SSDI benefits?

Income from the trust assets will not affect SSDI or any other government benefits.

What is a First Party Special Needs Trust, and how does it relate to special needs planning?

A First Party Special Needs Trust is a legal tool used in special needs planning to protect the assets of an individual with disabilities who is a trust beneficiary and also relies on government benefits such as Social Security. This trust allows the individual to receive public benefits while safeguarding additional assets within the trust.

How does a First Party Special Needs Trust impact eligibility for government benefits?

Establishing a First Party Special Needs Trust is designed to preserve eligibility for crucial government benefits, like Social Security and other public assistance programs. By placing assets into the trust, the individual can maintain eligibility for these benefits without risking disqualification due to excess assets.

Can a First Party Special Needs Trust be used in conjunction with an ABLE account?

Yes, it can. While an ABLE account is a valuable tool for certain disability-related expenses, a First Party Special Needs Trust can complement an ABLE account by accommodating a broader range of assets and providing additional flexibility in managing resources for the trust beneficiary’s benefit.

What types of benefits can a trust beneficiary receive from a First Party Special Needs Trust?

A First Party Special Needs Trust can provide for a variety of supplemental needs and services not covered by public benefits. This can include medical expenses, education, personal care, and other quality-of-life enhancements that contribute to the well-being and comfort of the trust beneficiary.

How does a First Party Special Needs Trust address the management of assets for the trust beneficiary?

The trust is structured to carefully manage and disburse assets on behalf of the trust beneficiary, ensuring that the funds are used to enhance their quality of life without jeopardizing their eligibility for essential government benefits. This proactive approach allows for the responsible management of assets while prioritizing the individual’s ongoing access to public benefits.