A Third-Party Special Needs Trust (SNT) is a legal tool designed to provide financial support for individuals with special needs
without jeopardizing their eligibility for government benefits such as Medicaid or Supplemental Security Income (SSI). Unlike other types of trusts, a third-party SNT is funded by assets belonging to someone other than the beneficiary, typically a parent, grandparent, or other family members. This type of trust ensures that a person with disabilities can maintain access to vital public benefits while also benefiting from additional resources to enhance their quality of life.
The key purpose of a third-party SNT is to supplement, not replace, government assistance. Funds from the trust can be used for non-essential expenses that improve the beneficiary’s well-being, such as education, entertainment, travel, specialized therapies, and personal care services not covered by Medicaid. However, trust funds cannot be directly disbursed to the beneficiary for basic needs like housing or food, as this could disqualify them from receiving means-tested benefits.
One of the primary advantages of a third-party SNT is that the assets within the trust are not considered the beneficiary’s property, meaning they do not affect eligibility for public assistance. Additionally, upon the death of the beneficiary, the remaining assets in the trust can be distributed to other family members or heirs, as designated by the trust’s creator. This distinguishes third-party SNTs from first-party or self-settled trusts, which require any remaining funds to be used to reimburse Medicaid.
In conclusion, a third-party Special Needs Trust offers a strategic way for families to provide long-term financial support for loved ones with disabilities. It preserves eligibility for crucial government benefits while allowing the trust to enhance the beneficiary’s quality of life through supplemental care and services.