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Canton Estate Planning & Probate Lawyer > Blog > Estate Planning > Third-Party Vs. First-Party Special Needs Trusts Explained

Third-Party Vs. First-Party Special Needs Trusts Explained


Special needs trusts serve an important role as an extra means of financial support for a loved one you have in your life that has special needs. Special needs trusts can be set up in a way that will not jeopardize your loved one’s ability to obtain the government benefits they need and are entitled to receive. Determining the most appropriate estate planning tools to meet your objectives is critical when you are putting your life’s events documentation together. Everything must be examined to ensure that your legacy is preserved and your loved ones are cared for appropriately when you are gone.

Regarding special needs trusts, there are two types to review. These would be first-party and third-party special needs trusts. It is imperative that you pick the right one for your specific circumstances. For help with estate planning, including learning more about special needs trusts, how they work, and the different types that may apply to your situation, a Canton estate planning attorney at The Law Office of Brian S. Karpe can help.

Critical Differences Between Third-Party and First-Party Special Needs Trusts

Like all estate planning tools, special needs trusts are governed by certain regulations and rules. For example, special needs trusts have provisions for what they can provide and what they cannot. In specific, some expenditures are allowed through a special needs trust, and in this way, these permissible items will supplement any benefits your loved one receives from the government. Additionally, the party that establishes the trust can impact how the assets in the trust are handled. When set up correctly, a special needs trust can provide several advantages for its beneficiary.

A special needs trust is created for the benefit of a special needs individual. In a third-party special needs trust, another party that is not the special needs individual puts the trust together for the special needs individual. As such, because the assets put into the trust are owned by another party who is not the special needs individual when the special needs individual passes, Medicaid cannot go after the assets in the trust. Also, the trust can be drafted so the assets that the third-party put into it may be accessible to the special needs individual when the third-party passes on or while they are still alive. There are no age limits in a third-party special needs trust.

By contrast, a first-party special needs trust is established using the assets of the special needs individual. The special needs individuals themself, their parents, a legal guardian, or a court can set up a first-party special needs trust. An important aspect of a first-party special needs trust is that because the assets owned by the special needs individual, upon their death, Medicaid can access them. In this trust, there are age restrictions. A beneficiary must not be 65 years of age or older.

Speak to a Connecticut Estate Planning Attorney Today

Estate planning law is complicated. Getting it right matters. For assistance and support, please call a Connecticut estate planning attorney at The Law Office of Brian S. Karpe today to schedule a free consultation at 860-217-1458.



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