A Special Needs Planning Trust is a specific type of trust designed to benefit individuals with disabilities without jeopardizing their eligibility for essential government assistance programs, such as Medicaid or Supplemental Security Income (SSI).
This trust allows the beneficiary, who is often a person with a disability, to receive financial support while preserving their access to these critical benefits. The funds within a Special Needs Planning Trust can be used for a variety of supplemental needs that enhance the quality of life of the beneficiary, such as education, recreation, therapy, and medical expenses that are not covered by government programs. However, the trust must be carefully structured to ensure that the assets do not count against the beneficiary’s asset limits for these programs.
Types of Special Needs Trusts include:
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First-Party Special Needs Trust: Funded with the beneficiary’s own assets, this type of trust is often used when an individual receives a settlement from a lawsuit or inherits money. It must be established under specific legal guidelines to avoid affecting government benefits.
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Third-Party Special Needs Trust: Funded by family members or friends, this type of trust is established to provide for the beneficiary’s needs without impacting their eligibility for public assistance. It is often created as part of the estate planning process.
Example: If a parent sets up a Third-Party Special Needs Trust for their child with a disability, they can contribute assets to the trust that will be used to pay for activities like vacationing, hobbies, or private education, without affecting the child’s ability to receive Medicaid benefits.
In Houston and surrounding areas in Texas, local laws and regulations may influence the specific setup and administration of a Special Needs Planning Trust, so it is advisable to consult with an estate planning attorney who is knowledgeable about both federal and state laws regarding these trusts.
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