A special needs trust (SNT) is a pivotal component of estate planning for those who have a loved one with a disability. The reason? If you intend to leave property or money to a person with special needs and don’t carry out the process properly, you could jeopardize your loved one’s ability to qualify for Medicaid and Supplemental Security Income (SSI) benefits. By establishing a special needs trust, your beneficiary will still be eligible to collect their government benefits while receiving funds from the trust.
Are There Different Types of Special Needs Trusts?
Yes, there are two types of special needs trusts in Georgia, including:
- First party trusts
- Third party trusts
First Party Special Needs Trusts
A first-party, or self-settled, special needs trust is created using assets belonging to the person with the disability. A parent, guardian or grandparent of the special needs individual – or a court – can establish the first-party trust. Additionally, as of December 13, 2016, federal law extended privileges to allow a legally and mentally competent SNT beneficiary to set up an individual first-party special needs trust.
First-party SNTs are typically utilized when a disabled individual receives a court settlement or inherits property or money. Property included in a first-party trust may only be used for the benefit of the beneficiary. What’s more, to establish this type of trust the individual must satisfy the government’s definition of “disabled” and be under the age of sixty-five when the SNT is created and funded. Upon the beneficiary’s passing, remaining assets within the trust must first be used to repay benefits provided by the state Medicaid program.
Third Party Special Needs Trusts
Third-party SNTs are typically established by parents of a special needs individual who are planning in advance for their loved one. However, a sibling, grandparent or another person (apart from the beneficiary) may also create and fund a third-party special needs trust.
Third-party SNTs can be revocable or irrevocable and established with an inter vivos trust or included in a Last Will and Testament. It’s important to note that this type of SNT does not designate Medicaid as the primary beneficiary upon the trust’s termination. Instead, the grantor has the ability to decide how the remaining assets in the trust are allocated upon the passing of the beneficiary.
By establishing a special needs trust, you’ll ensure your special needs or disabled loved one is fully and properly cared for. At Smith Barid, we help our clients make strategic personal and financial decisions as it relates to the preparation of special needs trusts. To learn more about how our attorneys can help you get started, contact us today.