At Walser & Herman Law, we’re often asked the question: How does a special needs trust work? Fortunately, Special Needs Trusts, or SNTs, are very straight-forward, as long as you understand the exact qualifications necessary, and the different types of trusts available given your circumstance.

If you have a disabled dependent like a child with special needs or a loved one in a nursing home, the ability to provide for them is of course a necessity. However, many instances of financial compensation can cause larger issues, like stripping the beneficiary of government benefits they’d normally be able to receive, like SSI or Medicaid. In Florida, there are a number of SNTs available to help you or your loved one stay financially secure, without losing other benefits in the process. So, how does a special needs trust work? Well, let’s first go over the various types of SNTs the state of Florida provides.

Special Needs Trusts in Florida

The two main types of special needs trusts in Florida are First-Party and Third-Party. The difference mainly depends on whose property is funding the trust, but other circumstances allow for a clearer indication of which option is better for you.

  • First-Party Special Needs Trusts

These SNTs are most often used when the person with a disability inherits property or money outright. They can also be used when an individual with personally owned assets later becomes disabled, and needs to qualify for benefits with an assets or income limitation. Formed and mandated under Federal Law, first-party SNTs can be established by any legally or mentally competent SNT beneficiary. They are funded with property that belongs to the beneficiary or to which the beneficiary is or becomes legally entitled.

Special needs trust benefits in a first-party SNT are only available for the sole use of that beneficiary, who must be legally classified as “disabled” by government standards. All amounts remaining in first-party SNTs after the beneficiary’s death must be paid back, up to an equal amount of medical assistance benefits paid for by a Medicaid program in their lifetime.

  • Third-Party Special Needs Trusts

These are most commonly used by persons who wish to plan for a loved one with special needs in advance, such as parents, grandparents, siblings or legal guardians. They can be drafted as a stand-alone SNT, or included in a Last Will & Testament, or an inter-vivos “living trust”. The latter two instances can only come into existence after the death of the individual whose Will or Trust created the SNT. A stand-alone SNT can be used as a receptacle for any lifetime or post-mortem gifts given by the beneficiary’s family or friends.

Special needs trust benefits in a third-party SNT differ in that there is no requirement to use remaining assets for reimbursement toward Medicaid benefits received in the beneficiary’s lifetime. Therefore, these are extremely useful for people who wish to set aside property for a beneficiary with disabilities, and still remain in total control of where the remaining assets go upon the beneficiary’s death.

Who Can Benefit From Special Needs Trusts?

Special needs trust benefits can be provided to a number of different people in a number of different circumstances. These can include:

    • Someone with permanent Special Needs – People who will most likely need government assistance their entire lives because of a disability
    • Someone with Special Needs who may not need benefits later – Not all disabilities are permanent. To avoid the uncertainty of knowing if someone will require benefits in the future, most SNTs consider this possibility, and give power to terminate the trust
    • Someone who may need benefits later – In situations where a condition may worsen over time, some “guessing” might come into play when creating a trust. Still, it makes sense to start a trust sooner than later in these instances, and once again, you may terminate a trust if circumstances change
    • Someone who cannot manage finances – Some mild disabilities may still call for an SNT to protect a beneficiary from reckless spending of inherited money

Walser & Herman Law

For over 30 years, our team at Walser & Herman Law Firm has been helping people create and maintain Special Needs Trusts for them or for their loved ones. If someone you know could benefit from a Special Needs Trust, please don’t hesitate to contact us today.