Individual special needs trusts (SNTs), whether first-party or third-party, are utilized to manage the financial affairs of a disabled person without thereby rendering him ineligible for need-based government benefits such as SSI and Medicaid. A major alternative that can accomplish the same purpose is the pooled SNT, which carries its own advantages and disadvantages. Which one is right for your loved one depends on the circumstances.
What is an Individual Special Needs Trust?
Individual SNTs come in two main varieties — third-party SNTs and first-party SNTs. To preserve eligibility for need-based government benefits, the trust cannot distribute cash to the beneficiary. It can, however, provide a variety of benefits, such as:
- It can purchase a computer for use by the beneficiary;
- It can pay tuition to an educational institution to provide for the beneficiary’s educational needs;
- It can pay the salary of a caretaker for the beneficiary.
The foregoing are only a few examples of the many non-cash benefits that can be provided to the beneficiary. Certain kinds of non-cash benefits, related to food and shelter, cannot be provided by the trust without jeopardizing eligibility for government need-based benefits.
One of the main disadvantages of individual special needs trusts is that the beneficiary must be under 65 years of age.
Third-Party Special Needs Trusts
In a third-party SNT, people other than the beneficiary — relatives, for example — fund a trust with their own assets, and then use it to provide for the needs of their loved one. It cannot hold assets that belong to the beneficiary himself.
First-Party Special Needs Trusts
A first-party special needs trust is established by or on behalf of the beneficiary, and it is funded with the beneficiary’s own assets — an inheritance, for example, or a personal injury settlement. These assets are not counted against the beneficiary for the purpose of determining eligibility for need-based government benefits as long as they are owned by the trust, not the beneficiary.
After the beneficiary dies, the trust must reimburse the state of Florida for any Medicaid expenses actually incurred by the beneficiary.
What is a Pooled Special Needs Trust?
A pooled SNT is established and administered by a non-profit organization. A disabled person can contribute his own assets (not someone else’s), and the trust will set up an individual trust account for him. Assets contributed by various beneficiaries will be pooled, and the beneficiary is entitled to receive his pro rata share of non-cash benefits. After the beneficiary dies, the trust must repay any Medicaid benefits he received. There are no age restrictions.
Contact a Florida Special Needs Trust Attorney Today
If you are considering establishing a special needs trust, it is not at all inappropriate to devote considerable thought to exactly how you want to do it. The best decision, of course, is more likely to be arrived at after you consult with an experienced attorney on this matter.
Contact trusts and estates attorney Jose Lorenzo today by calling (305) 999-5411, completing our online contact form or visiting one of our offices in Coral Gables and Ft. Lauderdale. We handle cases throughout the entire state of Florida.