Two Types of Special Needs Planning for Florida Estate Plans
If a loved one in your life suffers from a disabling medical condition, you may already be aware of the advantages of setting up a special needs trust for his or her benefit. There are many advantages to these arrangements, most notable being the fact that the beneficiary is still eligible for Supplemental Security Income (SSI) benefits when properly formulated. What you may not know is that there are actually two different types of special needs trusts that are suitable for different situations. Generally speaking, the distinction revolves around whose property is being used to fund the trust.
However, the differences between the two types of special needs trust go deeper than the source of funding. It’s essential to understand the form that you have – or need – in order to achieve the objectives you’re trying to accomplish. A Florida estate planning attorney can describe in more detail, but an overview may also be helpful.
Third-Party Special Needs Trusts: As the name suggests, this form of trust is typically funded by someone other than the person with a disability. Often, the creator is a parent, sibling, or other relative who wants to provide for the beneficiary upon their own death. Though it can be stand-alone, the third-party special needs trust doesn’t need to be a separate document to be effective. You can include relevant provisions in a will or traditional trust that you would execute to avoid probate.
With this type, the key factor is how the property held in the trust is handled when the beneficiary passes away. Upon the death of the person with special needs, the remaining amount does NOT need to pay back government benefits that he or she received while alive. If you’re the one setting up the third-party special needs trust, you retain control over where the trust funds go when your loved one dies.
First-Party Special Needs Trusts: This structure is most effective when a disabled individual:
- Receives property by inheriting it from someone else;
- Recovers funds through legal action, such as a personal injury lawsuit; or,
- Previously did NOT have a disabling medical condition, but developed one after already owning property.
As with the third-party version, a first-party special needs trust enables the individual to qualify for SSI and other needs-based benefits. However, there are some important distinctions to keep in mind:
- The trust must be irrevocable, i.e., unable to be changed;
- It must be funded by assets owned by the beneficiary; and,
- The first-party special needs trust must reimburse government agencies upon death.
Discuss Special Needs Trusts with a Florida Estate Planning Lawyer
There are strict rules and requirements for both first- and third-party trusts, and full compliance is critical when you’re trying to protect a loved one’s public benefits. As such, it’s essential to work with an attorney who’s knowledgeable in planning for those with special needs. To learn more about your options, please contact a Dade City estate planning lawyer at the Law Office of Laurie R. Chane to set up a consultation. You can reach our office by calling 352-567-0055 or filling out a consultation request form.