If you have a loved one with special needs, you may wonder if a third-party special needs trust is right for them. This type of trust has several benefits that can be very helpful for those with disabilities. Let’s take a closer look at this type of trust and the benefits your loved one may receive with third-party special needs trusts.

What Are Third-Party Special Needs Trusts?

A third-party special needs trust (SNT), or supplemental needs trust, is a legal framework that holds assets. The person funding the trust is called the “grantor.” The special needs person receiving the trust benefits is called the “beneficiary.”

With a third-party trust SNT, someone other than the beneficiary must fund the trust. Beneficiaries legally cannot contribute to a third-party special needs trust. They may consider setting up a first-person special needs trust with monies from a settlement or other savings.

Usually, third-party SNT funding comes from a loved one, such as grandparents or parents. The assets for the trust can come from an inheritance, gifts, a life insurance policy, etc.

How Do Third-Party Special Needs Trusts Help Individuals With Disabilities?

There are many reasons to set up a third-party SNT for your loved one with disabilities. This type of trust can ensure your loved one has financial care and quality-of-life possible for their future.

There are a few key ways third-party special needs trusts help those with disabilities:

• The trust can help the beneficiary maintain eligibility for government benefits such as Medicaid and Supplemental Security Income (SSI). The beneficiary benefits from the trust but does not own the trust. Therefore, the trust assets do not count against them for eligibility for government benefits.
• The trust can pay for things to improve the beneficiary’s quality of life that government benefits do not cover.
• When correctly set up, a third-party special needs trust does not need to reimburse the state for Medicaid benefits paid out during the beneficiary’s lifetime. (However, a first-party special needs trust must reimburse Medicaid for expenses incurred through the program during their lifetime.)

An SNT protects your loved one’s eligibility for government benefits while paying for non-covered quality-of-life services and items. A trust can give you peace of mind knowing that there is a plan in place for your loved one’s future!

If you’re considering setting up a third-party SNT for your loved one, be sure to discuss your options with an experienced estate planning attorney. They can help ensure that the trust is properly set up and will best meet the needs of your loved one.

What Can Individuals With Disabilities Buy With Their Trust Funds?

As the beneficiary of a third-party SNT, individuals with disabilities may use trust funds for many things that improve their quality of life. Government benefits like Medicaid or SSI must not already cover these expenses.

Some examples of common trust expenses include:

• Education and job training
• Transportation not already included in government benefits
• Housing not already included in government benefits
• Medical and dental care not already included in government benefits
• Recreational activities
• Vocational rehabilitation services not already included in government benefits

Third-party special needs trusts can provide your loved one significant benefits and peace of mind for their future. If you’re considering setting up a trust, speak with an experienced estate planning attorney who can help you understand all your options.

Who Manages a Third Party Special Needs Trust?

When you draw up a trust with your attorney, you decide how the trust assets will benefit your loved one. You may talk with your attorney about who will receive the trust assets if the beneficiary passes away. And you also decide who will manage the trust, the “Trustee.” 

You can act as the trustee or choose someone else or even a professional trustee company. The trustee is responsible for managing the trust and ensuring that funds benefit the beneficiary.

What Else Do I Need to Know About Trusts and Estate Planning?

When planning your future and that of your loved one with disabilities, you may wish to include funds for a third-party SNT in your Last Will and Testament. However, there are factors to consider first.

Third-Party SNT Establishes On Grantor’s Death

Establishing a living trust can avoid probate court for your estate and contain the third-party SNT as a sub-trust. Establishing the trust in this way means that the trust will not distribute funds to the beneficiary until after you pass away. 

In addition, no one else may contribute to your sub-trust until after the grantor’s death forms the 3rd party SNT.

Stand Alone Third-Party SNT 

Drafting a stand-alone SNT allows others to contribute. Perhaps parents, grandparents, and siblings would like to add funds to the trust. 

In addition, you can establish a stand-alone 3rd party SNT to start distributing to the beneficiary immediately. There is no need to wait for the grantor to pass away. (1)

If you’re considering setting up a third-party special needs trust, be sure to discuss your options with an experienced estate planning attorney. With careful planning, you can give your loved one with disabilities crucial financial security and peace of mind for their future!

We Can Help

At Vail Gardner Law, we understand that third-party SNTs are an essential tool, providing financial security and quality of life for individuals with disabilities. If you’re considering setting up a third-party SNT for your loved one, talk with us about your options. Our experience in estate planning for special needs individuals can ensure the proper legal setup of the trust and best meet your loved one’s needs.

Contact us today to find out how we can help you find peace of mind about the future!