Caring for a family member with disabilities comes with unique challenges, especially when it comes to securing their financial future while maintaining eligibility for government benefits. The Third Party Funded Supplemental Needs Trust offers a powerful solution, allowing families to plan ahead and provide essential support without jeopardizing access to vital assistance. In this article, we will explore the benefits and careful planning required for this type of trust, ensuring peace of mind for both families and their loved ones with disabilities.

What is a Third Party Funded Supplemental Needs Trust?

The Third Party Funded Supplemental Needs Trust is a trust established and funded by a third party, typically a family member other than the individual with disabilities, their spouse, legal guardian, or a court. Relatives often use this trust to financially assist their loved one while preserving their eligibility for government benefits. These trusts can be set up as Testamentary Trusts, specified in the will, or Inter-Vivos Trusts, created during the Settlor’s (the person establishing the trust) lifetime.

Preserving Government Benefits

To ensure continued eligibility for benefits like Supplemental Security Income (SSI) or Medical Assistance (MA/Medicaid), the trust must be crafted carefully. The trustee is granted discretion to spend or retain funds, but they must never use the funds in a manner that would jeopardize the individual’s eligibility for government support. The trust can enhance the individual’s benefits, but it must never replace or supplant them. A key feature of this trust is the ability to have multiple beneficiaries, including other siblings or charitable organizations, as long as the primary beneficiary with disabilities remains protected.

Common Terms For Third Party Trusts

Third Party Funded Supplemental Needs Trusts are sometimes referred to as discretionary trusts, non-support trusts, or common law trusts due to their nature based on court cases rather than statutes. In certain contexts, they are called “Lang” Trusts. However, it is crucial to differentiate between this type of trust and a “Special Needs” Trust, which specifically refers to a “Payback” Trust. The latter involves reimbursement to the state for benefits received, while the Third Party Funded Supplemental Needs Trust does not have this requirement.

Important Considerations for Establishing Third Party Trusts

One critical aspect to remember is that a Third Party Funded Supplemental Needs Trust cannot be self-funded once the individual is entitled to receive assets. It must be established by a third party, usually a parent, as part of their estate planning. Leaving assets directly to the individual with disabilities would forfeit the opportunity to establish this trust. To secure the beneficiary’s financial future effectively, the trust must be carefully outlined in the will, designating the trustee and detailing how the assets are to be used for the individual’s benefit.

Empowering Families

A Third Party Funded Supplemental Needs Trust can empower families to provide lifelong support for loved ones with disabilities while protecting their access to government benefits. By working closely with experienced legal professionals and Certified Trust and Financial Advisors, families can navigate the intricacies of setting up this trust, ensuring their loved ones receive the care they deserve without sacrificing essential government assistance. Careful planning and understanding the nuances of this type of trust will pave the way for a secure and prosperous future for individuals with disabilities and peace of mind for their caring families. Contact RCFS to discuss whether this type of trust fits your situation. •