Video Summary

What is a Special Needs Trust?  Special Needs Trusts began in the mid-1970s as a method of providing disabled beneficiaries in such a way that the Trust provided for the beneficiary’s special needs beyond the scope of public benefit programs offered by federal, state and local governments.  The most important element of a Special Needs Trust so that such a Trust does not adversely affect the beneficiary’s receipt of Social Security SSI, Medicaid benefits or other governmental benefits is that the beneficiary has no ability to revoke or amend the Trust or to effectively direct the use of the Trust’s assets for the beneficiary’s own support and maintenance.

There are two types of Special Needs Trust.  The first type is a Self-Settled or also known as a First Party Special Needs Trust.  The second type is called a Third Party Special Needs Trust.

What is a Third Party Special Needs Trust?  A Third Party Special Needs Trust is one that is established and funded by someone other than the beneficiary.  For example, a parent or a grandparent might establish a revocable and provide within that revocable Trust that a Special Needs Trust be established for a child or grandchild upon the parent’s or grandparent’s death.  Such a Trust is a Third Party Special Needs Trust.

Prior to the development of the Special Needs Trust, it was not uncommon for a family to disinherit their disabled or special needs beneficiary because any inheritance would diminish or more likely disqualify the special needs beneficiary from the receipt of the beneficiary’s public benefits programs.

The goal of supplemental needs trust is to provide the disabled beneficiary with funds to meet the beneficiary’s supplemental or special needs without disqualifying the beneficiary from his receipt of the public benefits the beneficiary would otherwise be entitled to but for the existence of the inheritance.

The second type of Special Needs Trust is called a Self-Settled or First Party Special Needs Trust.  The Self-Settled Special Needs Trust or supplemental needs trust is also referred to as a D4A Trust after the federal statutory section that permits the use of this type of Special Needs Trust or also known as a First Party Special Needs Trust.  The Self-Settled Special Needs Trust is established for the appropriate court that has jurisdiction over the individual or subject matter that gave rise to the need for the Special Needs Trust.

A Self-Settled Special Needs Trust is different from a Third Party Special Needs Trust in that the Self-Settled supplemental needs trust is established by the beneficiary of the Special Needs Trust and funded with the beneficiary’s own assets.  Typically the assets to fund the Self-Settled Special Needs Trust arise from an unusual event, often a personal injury lawsuit but also could be for lottery winnings or even a significant inheritance that was received by the beneficiary without the benefit of a Third Party Special Needs Trust or supplemental needs trust.

The Self-Settled Special Needs Trust is designed to allow someone who receives a personal injury recovery or any other significant lump sum of money or other countable assets and who is or will become dependent on public benefits programs such as SSI or Medicaid to preserve those funds in a Special Needs Trust or supplemental needs trust.  The Special Needs Trust will provide for special or supplemental needs beyond those provided by the state or federal public benefits programs for which the beneficiary is eligible.

It is not relevant whether the need for public benefits arose either because of an existing disability or a disability that resulted from circumstances surrounding the accident that gave rise to the personal injury recovery.  Through the use of special settled Special Needs Trust, the beneficiary can achieve essentially the same benefits of a Third Party Special Needs Trust beneficiary established by a third party.

If you have any questions regarding whether or not a Special Needs Trust is viable for you or for a loved one, please give us a call at Waller & Mitchell.  Our phone number is (727) 847-2288.