Many individuals with impairments or disabilities depend on public benefits to handle the expenses associated with medical and personal care.
How is it possible to leave income for a loved one with special needs without affecting their eligibility for public benefits? Keep reading to understand what a 3rd party special needs trust is in Florida.
What is a Florida Trust? – Understanding the Concept
A trust is a legal arrangement in which the trust maker (the trustor) transfers ownership of assets to a trustee (fiduciary) to benefit one or multiple beneficiaries. There are two main types of trusts – revocable trusts and irrevocable trusts.
If someone creates a revocable trust, it is possible to amend, change, or revoke the trust agreement while the trustor is still alive. Once the trustor dies, all revocable trusts automatically become irrevocable.
An irrevocable trust does not accept amendments or modifications once it is executed. Except with court intervention, it is not possible to alter or revoke an irrevocable trust.
Florida Special Needs Trusts
A special needs trust (SNT) is a trust created exclusively to benefit a person with special needs. In most cases, the parents or grandparents of individuals with special needs create SNTs to protect their loved ones in the future.
Similar to other trusts, the trustor funds the SNT by transferring assets to the trustee. The trustee is responsible for holding the title of these assets on the beneficiary’s behalf, always upholding a fiduciary duty to him or her.
This specific type of trust also permits a person with special needs to receive income without losing the eligibility for public benefits, such as Medicaid or Supplemental Security Income (SSI).
For example, a disabled individual who receives a significant amount of money through an inheritance could immediately disqualify for different public benefits. Considering the hefty costs associated with healthcare for disabled individuals, the amount could be quickly drained by the expenses.
With a SNT, this individual can receive the inheritance through the trust without losing the eligibility for the public benefits.
What is a 3rd Party Special Needs Trust in Florida? – The Verdict
A third-party special needs trust is a SNT established by someone other than the beneficiary to ensure the beneficiary’s unique needs are satisfied. Third-party SNTs can be established as revocable or irrevocable trusts, depending on the beneficiary’s needs and goals.
Different from first-party special needs trusts, third-party SNTs do not involve a “payback” mechanism. If any amounts remain in the trust at the time of the beneficiary’s passing, the remainder does not need to pay it back to the government.
The benefits of third-party special needs trusts include:
- Protecting the beneficiary’s eligibility for government benefits while shielding the beneficiary’s funds
- Ensuring the beneficiary’s access to resources needed for additional care beyond Medicaid and other public benefits
- Ensuring the beneficiary’s access to enhanced quality of life, not only necessities provided by medical benefits
- Ensuring the beneficiary’s access to private education, vacations, social events, and other leisure activities
- Shielding the funds held in the trust by putting a professional or responsible individual as the fiduciary to the trust