A special needs trust is a type of trust that helps preserve a disabled person’s eligibility for federal and state benefits by keeping assets out of the person’s name. There are two main types of special needs trusts:
1. First Party Special Needs Trust: The trust is created and funded by the disabled person’s own money. The trust must be irrevocable and the terms of the trust must state that Medicaid will be reimbursed upon the beneficiary’s death or termination of the trust. Often these types of trusts are created out of necessity to keep the disabled person’s benefits in place when they inherit money or receive money from a personal injury lawsuit.
2. Third Party Special Needs Trust: Someone (such as a parent or grandparent) creates and funds the trust for the benefit of the disabled person. It is not required to include the Medicaid payback provision because the remaining assets are not recoverable by Medicaid at the time of the disabled person’s death. These trusts can name remainder beneficiaries to receive those assets.
Special needs trusts are complex documents that must adhere to very specific rules of law. If you have a loved one who is disabled and needs the protections of a special needs trust, please call 443-470-3599 to set up a consultation with one of our experienced estate planning attorneys.