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FAQ: Special Needs Planning

Q. What is a Special Needs Trust?
A Special Needs Trust (SNT) is a trust that creates a financial reserve for an incapacitated person while allowing that person to continue to receive public benefits such as Medicaid and SSI.
Q. I’ve heard that there are two types of Special Needs Trusts, but I don’t understand the difference?
The first type of Special Needs Trust is called a Third Party SNT. It is funded by a third party, usually the parents who are called the Settlors of the trust. Other third parties, such as grandparents, can contribute to the Third Party SNT.

The second type of Special Needs Trust is called a First Party or Pay-Back Trust. It is funded by the incapacitated person when that person inherits resources, or is awarded money in a personal injury action.
Q. How is a Special Needs Trust funded?
A Third Party SNT can be created either in a will or when the Settlor of the trust, the Third Party, is alive. If the Settlor of a Third Party SNT wants it funded after his death and uses a will to do so, all or a portion of the estate resources can be used to fund the trust at probate

With a First Party or Pay-Back SNT, a disabled person who is below the age of 65 creates the Trust through a Parent, Grandparent, Guardian or The Court. The disabled person is not allowed to directly set up the trust.
Q. What can be purchased with Special Needs Trusts funds?
Products and services that improve the lifestyle of the Disabled Person but which public benefits are not available for can be purchased with these trust funds. Some examples: a house, a specially equipped van, vacations, care managers and medical services.
Q. What is a Pooled Trust?
A Pooled Trust is a Special Needs Trust established and managed by a non-profit association. A Pooled Trust is funded by the disabled individuals who have joined the Pooled Trust. For a First Party or Pay-Back Trust there is no requirement that the Trust be set up through a Parent, Grandparent, Guardian or The Court because the Trust is already set up by the non-profit. However, most non-profits that have pooled trusts have a separate Pooled Trust for the Third-Party trust.
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