A First-Party Special Needs Trust (SNT) is set up with money that belongs to the person with special needs. This may happen if the person with the special needs was accidentally named a beneficiary outright. Proceeds from a settlement resulting from a lawsuit can go into this type of trust. Usually, this trust is still set up by a parent, grandparent, guardian, or conservator. In order to set up a First-Party Special Needs Trust, a parent, grandparent, guardian, or conservator must go to court. The court will authorize the trust to be set up and then the parent, grandparent, guardian or conservator will sign it. To ensure everything goes smoothly, it is important to consult with an experienced Fairfax Trust Attorney prior to going to court.
The reason to set up this type of trust is to keep the special needs beneficiary on government benefits. There are strict income and asset requirements in place in order to receive state and federal benefits. If the special needs beneficiary is even one dollar over the income or asset limit, they cannot receive benefits until he/she spends it down or fixes the income limits.
The main difference with this type of trust is that after the death of the person with special needs, the state and federal government are paid back for the benefits provided to that person during the lifetime of the trust. After the money is paid back, any remaining money can be given to additional beneficiaries designated by the trust drafter.
Both First-Party and a Third-Party Special Needs Trusts allow assets to be set aside to supplement expenses not covered by government benefits. However, there are differences between these two types of trust.
Some characteristic of a First Party SNT are the following:
If you have questions about First-Party SNTs, it’s important to seek help with a qualified Fairfax trust attorney. For more information on this type of trust, contact Rhonda today.