Special Needs Trusts

Special Needs Trusts can be established to improve the quality of life for individuals without disqualifying them from receiving public benefits.  These trusts are designed to help people with disabilities pay for items and services that government benefits do not cover. 

There are two types of Special Needs Trusts that can be set up:  A First-Party Special Needs Trust (also known as D4A Trust or Self-Settled Special Needs Trust) is an irrevocable trust that is established with the assets of the individual with a disability.  The individual with the disability may have received funds through an inheritance, lottery winnings, or proceeds from a lawsuit or other money that they had at the time of their disability.  First-Party Special Needs Trusts have a Medicaid pay-back and the individual must be disabled and under the age of 65 at the time the First-Party Special Needs Trust is created.

Third-Party Special Needs Trusts are the second type of Special Needs Trusts.  They are created by someone other than the disabled person, such as parents, grandparents, other relatives, or friends.  A key difference from the First-Party Special Needs Trust is that Third-Party Special Needs Trusts do not have a Medicaid pay-back provision requirement.  As there is no Medicaid pay-back provision, the creator of the trust can choose where the money will go after the beneficiary dies, making the Third-Party Special Needs Trust a preferable option for many.

Both First-Party and Third-Party Special Needs Trusts can be established as pooled trusts, which are managed by a non-profit organization. Separate accounts are maintained for each beneficiary, but assets are pooled for investment and management purposes. Accounts are established solely for the benefit of the disabled individual and the account in the trust is established through the actions of the individual, a parent, grandparent, a legal guardian or court.