Understanding the Different Types of Special Needs Trusts

Legally preparing for the time when you or a loved one becomes deceased or incapacitated requires a lot of consideration and planning to ensure your wishes are properly executed. Creating a will is a just one step in the estate planning process. There are a few additional safeguards, such as setting up a trust, that you may want to consider.

A trusts work a bit differently than a will, in that it is a fiduciary arrangement specifying the distribution of your assets and is typically void of probate court. There are also several additional benefits to creating a trust to supplement your will, such as transferring property with minimal estate taxes and preserving your assets without the public or outside input.

Due to a trust’s more specific and definitive nature, there are two main types of special needs trusts available to better protect those who are disabled and do not want to risk losing their eligibility for financial assistance programs with an income or earnings cap.


special needs trust lawyer boca raton2 Types of Special Needs Trust

There are two types of special needs trusts that you should evaluate, a Third-Party Trust and a Self-Settled Trust. Below, we detail how to differentiate the two types of special needs trusts.

Type 1: Third-Party Trust

This is essentially set up, or funded, by a third party, which would likely be the beneficiary’s family member(s) or friend(s). There are no age limits or concerns about Medicare and Medicaid when a Third-Party Trust is created. However, if the trust pays or distributes income to the beneficiary, it may reduce and potentially eliminate their public benefits. With this type of special needs trust, it’s recommended to use it to pay for goods or services, such as care givers or at-home nurses, as opposed to paying it to yourself as income, which could lower disability or government financial assistance, which has an income cap.

Type 2: Self-Settled Trust

In contrast to a third-party setting up the trust, a Self-Settled Trust, commonly referred to as a (d)(4)(A) Trust, is created by the beneficiary on their own behalf. This is where it can be a bit more complex, as it has to be established by the beneficiary’s parent, grandparent, guardian, or the court.

When creating this type of special needs trust, you will need to consider any current Medicare claim or Medicaid lien and any reimbursement from liable third parties. The beneficiary must also be under the age of 65 in order to create a Self-Settled Trust.


Setting Up the Right Special Needs Trust

Creating a special needs trust has many benefits. The challenge is that they can be more complex to create in comparison to a will. A special needs trust attorney can provide more flexibility and expertise when evaluating and structuring the best trust for you or a loved one. They will know the best course of action for your specific needs.

Setting up a special needs trust will allow you or your family member to continue to qualify for public benefits such as SSI or Medicaid and keep any settlement checks. Contact the Law Office of Audra Simovitch today to discuss how we can help you set up a special needs trust.

What should I do if I am on public benefits, I have a family member on public benefits, or I need public benefits; and there is a big settlement check will I or my loved one be disqualified from receiving those benefits? Setting up a special needs trust will allow you or your family member to still qualify for public benefits such as SSI or Medicaid and still allow you to keep the settlement check. Call the Law Office of Audra Simovitch today to discuss how we can help you set up a special needs trust.