How First Party Special Needs Trusts Can Safeguard SSI and Medicaid Eligibility in Florida

If you or a loved one is receiving government benefits like SSI or Medicaid in Florida, it's important to understand how Special Needs Trusts can help preserve eligibility for these critical programs.

In this blog post, we'll take a closer look at First Party Special Needs Trusts - what they are, how they work, and when they can be beneficial.

What is a Special Needs Trust?

A Special Needs Trust is a legal tool that allows assets to be held in the name of the trust for the benefit of a person with special needs.

The key advantage is that the assets in the trust do not count against the $2,000 asset limit that many government benefit programs like SSI and Medicaid impose. This means the beneficiary can have access to additional funds beyond what their public benefits provide to enhance their quality of life.

There are two main types of Special Needs Trusts - First Party and Third Party. They differ based on whose assets are funding the trust.

First Party Special Needs Trusts, Explained

With a First Party Special Needs Trust, the assets belonging to the person with special needs are transferred into the trust. Common scenarios where this type of trust is used include when the individual receives an inheritance, personal injury settlement, or worker's compensation settlement.

Here are some key things to know about First Party Special Needs Trusts in Florida:

• They are for beneficiaries under age 65. If you are over 65, you would need to use a Pooled Special Needs Trust instead, which is managed by a non-profit.
• A trustee manages the assets and expenditures for the benefit of the individual with special needs. The beneficiary cannot directly control the assets.
• Upon the beneficiary's death, any remaining assets must first be used to pay back Medicaid for expenses it covered during the beneficiary's lifetime. This is known as the Medicaid payback provision. Any funds left after the payback would then be distributed to remainder beneficiaries.

How a First Party Special Needs Trust Can Help

Assets in the trust can be used to pay for a wide variety of things to improve the beneficiary's quality of life beyond what their public benefits provide.

This could include things like:

• Unreimbursed medical and dental expenses
• Rehabilitation and therapeutic services
• Transportation, including accessible vehicles
• Computers, videos, furniture, and other personal items
• Recreation, vacations, hobbies
• Housing expenses
• Education and training programs
• Personal care attendant services

Having access to funds in a Special Needs Trust can make a meaningful difference in the beneficiary's life and provide resources that would not otherwise be available to them.

First Party vs Third Party Special Needs Trusts

It's important to understand that once assets are owned by the individual with special needs, they are required to be placed into a First Party Special Needs Trust. Those assets cannot then be transferred to a Third Party Special Needs Trust.

A Third Party Special Needs Trust is funded with assets from someone other than the beneficiary, like a parent or grandparent. This type of trust does not include a Medicaid payback provision. So any remaining funds upon the beneficiary's death can pass to other named beneficiaries.

When possible, it's often advantageous for families to plan ahead and have assets go directly into a Third Party Special Needs Trust to avoid the Medicaid payback provision. But in many cases, such as with an unexpected settlement, the First Party Special Needs Trust is the necessary tool.

The Importance of Proper Special Needs Planning

Understanding the different trust options for special needs planning can be confusing, but it's important to have the right tools in place to ensure the protection and care of a loved one with special needs.

If you have questions about Special Needs Planning and whether a First Party, Third Party, or Pooled Special Needs Trust is right for your situation, contact our experienced Special Needs Planning attorney at Elder Needs Law.

We can evaluate your specific circumstances and make recommendations to help you use the best tools and strategies available.

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