Question: Could you explain a Special Needs Trust?

The use of the term Special Needs Trust can be confusing and misleading. Special Needs Trust can come in 3 distinct varieties depending on the situation.

1. Self-Settled or First Party Trust – These trusts are funded with the assets of the individual with special needs. The most common use of these trusts is when there is a legal settlement awarded to the special needs individual. This type of trusts should not be funded with Third Party money, meaning any money that comes from parents, grandparents, relatives, or friends. We only want to fund these trusts with the Special Needs Individual’s money. The reason for this is because these trusts have a payback provision. This means that when your special needs loved one dies, the remaining assets in this trust must first be used to pay back the government for any benefits used during the lifetime of your loved one.
2. Third Party Trust – We fund this trust with money that comes from parents, grandparents, relatives and friends. The reason we use a Third Party Trust for money that is not originated from the special needs individual is because there is NO payback provision. This means that you determine how the assets remaining in the trust are distributed when your loved one dies. In essence, you have accessed all government benefits for your loved one while preserving your family assets.
3. Pre-Obra Trusts – These are trusts that were funded with the special needs person’s money and created before 1993. This type of trust can no longer be created.

If you have any questions please feel free to visit www.ASpecialNeedsPlan.com, call Ryan Platt at 704-557-9630, or email Lauren with your question and we will have Ryan answer it and post it in our next newsletter and on the website.