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A “special needs trust” (SNT) is a trust designed for a person living with special needs to preserve government-funded benefits when inheriting or receiving large sums of money or assets. It is created to place that inheritance or sum of money in a trust for the designee’s benefit without hurting that person’s eligibility to receive certain benefits. Our Melbourne attorneys have experience assisting clients in establishing special needs trusts for their loved ones. 

Types of Special Needs Trusts

There are two forms of special needs trusts: a first-party trust and a third-party trust. Certain circumstances must be met for either trust to be used, so an experienced special needs trust attorney can help a person decide the best SNT for their situation.

First-Party Special Needs Trusts

These SNTs are less common and must meet specific criteria under 42 USC § 1396p. First-party special needs trusts protect formerly earned assets or currently earned assets from being used to pay residual costs Medicaid will not pay because of the beneficiary’s economic status. Instead, once the beneficiary dies, the remaining assets in a first-party SNT will be used to pay off any Medicaid liens created during the beneficiary’s life for costs related to their care.

Third-Party Special Needs Trusts

A third-party SNT is the most common SNT. It can be established to protect a disabled person’s inheritance without disrupting Medicaid or SSI eligibility. In addition, a general third-party SNT can be used to provide financial assistance to a disabled family member. Third-party special needs trusts also include Achieving a Better Life (ABLE) accounts to establish tax-free savings accounts for a disabled individual’s expenses.

When to Utilize a Special Needs Trust

A person may be asking themselves, when should I consider using a special needs trust for my loved one? Making that decision can be a complicated process with specific considerations in mind. Below are a few common examples of when a special needs trust can be used.

Protecting a Disabled Child’s or Surviving Spouse’s Inheritance

Parents of disabled children and spouses with a surviving spouse receiving government benefits may fear putting their child or spouse at risk of losing their benefits through an inheritance. A parent or spouse can use a SNT to secure inherited assets without hurting a loved one's eligibility for benefits.

Addressing Strict Income Thresholds

Florida has a strict income cap for Medicaid eligibility. If an older adult needs Medicaid benefits, any earned income that exceeds the cap renders that person ineligible for benefits. Thus, earned income through a pension, Social Security, or another form of income siphoned into a third-party trust can allow that person to receive that income. By doing this a person avoids jeopardizing Medicaid eligibility and leaving that person with exhorted medical and nursing costs.

Financial Windfalls

When a person receiving government benefits receives a financial windfall, those funds can be considered a form of income. Since rejecting those benefits may not be a financially wise action or allowed, an SNT is an alternative way to prevent losing those assets without interfering with current Medicaid/SSI eligibility. 

Contact Us Today

At Lacey Lyons Rezanka, our experienced special needs trust attorneys understand many clients' financial difficulties when making these complex decisions. Our attorneys and staff are here to walk you through the process and ensure your needs are met. Contact our Melbourne attorneys today for a consultation.