When you plan your estate to help a loved one with special needs, you need to know the types of Special Needs Trusts (SNTs) you can choose. These trusts allow you to support your loved ones financially without risking their eligibility for government benefits such as Medicaid or Supplemental Security Income (SSI).
Third-party SNTs
Parents, grandparents or other family members typically establish third-party Special Needs Trusts using their assets. These trusts do not require a payback provision to the state upon the beneficiary’s death, allowing you to direct the distribution of any remaining assets after your loved one with special needs passes. This flexibility makes third-party trusts a popular choice for those who want to support their loved one with special needs while also planning for other family members.
First-party SNTs
Individuals with special needs can also use their assets to set up first-party Special Needs Trusts or self-settled trusts. People often use these trusts when the beneficiary gets an inheritance or court settlement that might disqualify them from getting government benefits. These trusts have a payback provision, requiring the trust to use its remaining assets to reimburse the government for Medicaid benefits received by the beneficiary once they pass away.
Pooled SNTs
Pooled Special Needs Trusts combine assets from multiple beneficiaries while a nonprofit organization manages the fund. This option benefits individuals over 65 or those who do not have sufficient assets to justify a standalone trust.
Importance of legal guidance
When choosing a Special Needs Trust, consider talking to a lawyer who knows estate planning extensively. This helps ensure the trust follows Washington State and federal laws, helping you preserve your loved one’s right to get key government benefits. If you pick the right kind of trust, you can help your loved one live better while preserving their right to get vital government aid.