This is the second blog post about special needs trusts, we are sharing three in total!  This post is about first party special needs trusts, sometimes referred to as 1st party special needs trusts or 1st pty SNTs.  We know that sometimes there are circumstances which arise where the person with special needs has money or will receive money and for all intents and purposes it is THEIR money.

What is an example when a first party special needs trust is appropriate?  If there is a judgement in favor of the person with special needs.  Perhaps there was a car accident, involving the negligence of another and the person with special needs was hurt.  The negligent party may owe the person with special needs a monetary award.  The person with special needs, however, cannot manage their finances because they are incapacitated.

Another example is when a parent has a child with special needs and names the child, personally, as the beneficiary of an account, an insurance policy or as the beneficiary of their estate in a Will.  This is where a first party special needs trust may be appropriate if there are not other remedies available to protect the money.

First party trusts special needs trusts, also called self-settled trusts or self-funded trusts, have particular requirements in order to maintain eligibility for programs such as Medicaid and SSI.  In order to maintain eligibility or be entitled to benefits in the future, the trusts need to say and do certain things and, more specifically, must not allow certain behavior by either the trustee or the beneficiary.  The trustee is the person who is responsible for the trust (they give money out and manage money in the trust) and the beneficiary is the person who established the trust, the person who has special needs.

In order to ensure that a first party special needs trust is set up correctly, one should really work with an experienced attorney who handles these types of trust regularly.  If you are interested in learning more about first party special needs trust and other types of special needs trusts, reach out to our firm and we can help.