Special Needs Trusts
Lindsey Eastwood is a probate attorney with specific experience creating special needs trusts, which are simply trusts designed to aid a person with special needs. There are three main types of special needs trusts: (1) first-party trust, (2) third-party trust, and (3) pooled trust. Each of these trusts name the special needs person as the beneficiary, but they differ in several significant ways.
A first-party special needs trust is designed to hold a SSI beneficiary's own assets, but a beneficiary's parent or grandparent, or a court, must create the trust even though the beneficiary's assets are going to fund the trust. During the beneficiary’s life, the trust funds are used for the beneficiary’s benefit, and when he dies, any assets remaining in the trust are used to reimburse the government for the cost of the beneficiary’s medical care. A first-party trust is especially useful for SSI beneficiaries who come into large amounts of money because a first-party trust allows the beneficiary to retain his benefits while still being able to use his own funds when necessary.
A third-party special needs trust is frequently used by parents and other family members to assist a person with special needs. A third-party special needs trust can hold any kind of asset imaginable belonging to the special needs person, including a house, stocks and bonds, and other types of investments. The third-party trust operates like a first-party special needs trust in that the assets held in the trust do not affect an SSI beneficiary's access to benefits and the funds can be used to pay for the beneficiary's supplemental needs beyond those covered by government benefits. However, a third-party special needs trust does not contain the "payback" provision found in first-party trusts. This means that when the special needs person dies any funds remaining in her trust can pass to other family members, or to charity, without having to be used to reimburse the government.
A pooled special needs trust is an alternative to the first-party special needs trust. Essentially, a nonprofit can create a pooled special needs trusts to allow a group of beneficiaries to combine their resources for investment purposes, while still maintaining separate accounts for each beneficiary's needs. When the beneficiary dies, the remaining funds in the beneficiary's account reimburse the government for his or her care, but a portion also goes towards the nonprofit organization responsible for managing the trust.
If you are interested in learning more about trust instruments or creating a special needs trusts, please contact Lindsey Eastwood Law to schedule a consultation.
Contact Lindsey M. Eastwood
2001 Park Place, Suite 255
Birmingham, AL 35203