Thorough estate planning may help a person identify what they want to happen with their assets when they die. It may also help them provide for their own care or their spouse’s care as they age.
A special needs trust is one of the tools that a person may utilize when developing an estate plan when caring for an ill or disabled person is needed. Understanding how this trust works is important. Two types of these trusts are first-party special needs trusts and third-party special needs trusts.
First-party special needs trust
As explained by SmartAsset, a person with their own assets who also has a physical or mental disability or a chronic illness may establish a special needs trust for themselves. Their assets go into the trust to be used for their long-term care needs. When the beneficiary of a first-party special needs trust passes away, funds remaining in the trust may be repaid to the government for benefits the beneficiary received.
Third-party special needs trust
Forbes indicates that a third-party special needs trust may be set up by one party for the benefit of another party, such as a disabled child. When the beneficiary of a third-party special needs trust passes away, funds remaining in the trust may be distributed to other heirs.
Benefits of a special needs trust
A special needs trust ensures the availability of financial resources to care for someone with a chronic illness or a disability. In addition, the trust retains the beneficiary’s ability to receive government assistance like Medicaid, Supplemental Security Income or Social Security Disability.