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Actions prior to age sixty-five: Establish a First Party Special Needs Trust

A brief explanation of the advantages and operation of a First Party Special Needs Trust

First_Party_Special_Needs_Trust If the amount of a gift, inheritance or personal injury award received by your child exceeds the resource limits for Supplemental Security Income (“SSI”) or Medicaid, it will jeopardize his or her eligibility for those means-tested government benefits.  In that event, you have the option to establish another type of trust, called a First Party Supplemental Needs Trust (a “First Party SNT”).  A First Party SNT may be established by a parent, grandparent, guardian or the Court.  Recently, the Federal Law was changed to allow an adult with a disability who is mentally competent to establish his or her own First Party SNT.  This change was long awaited and overcomes the misguided presumption in the Federal Law that “disability” always means “incapacity!”   

What is contributed to a First Party SNT is your child’s own money or property, not money or property of a third party.  This feature is the first characteristic which distinguishes a First Party SNT from a Third Party Supplemental Needs Trust (a “3rd Party SNT”).   A First Party SNT allows the Trustee to distribute the income and principal of the trust (in the sole discretion of the Trustee) in order to enhance and enrich the life experience of your child.  

Property and money contained in the First Party SNT is disregarded as a resource and therefore will not jeopardize your child’s eligibility for Medicaid and SSI benefits.  Because Medicaid provides access to health care and sometimes to housing, the loss of this benefit can be life altering.  Preservation of Medicaid benefits is perhaps the single most important feature of a First Party SNT.    

A First Party SNT is often referred to as a “pay-back” trust because what remains in the trust at the death of your child must be used to “pay-back” the State for the Medicaid it paid for the benefit of your child during his or her lifetime.  This is the second characteristic which distinguishes a First Party SNT from a 3rd Party SNT.  A 3rd Party SNT does not have the requirement to “pay-back” the State; instead, what remains in the trust at the death of your child can pass to those persons or organizations valued by you or your child.    

Previous Article Actions Prior to Age 18: Secure Article 17-A Guardianship
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