For individuals with a special needs loved one, creating a Houston special needs trust can drastically improve their lives. Special needs trusts allow individuals to still receive government disability benefits while simultaneously receiving property and assets. However, there are two different types of special needs trust: first-party and third-party trusts. While these special needs trusts have many similarities, there are critical differences between the types of trusts. Because of this, knowing the differences between a first- and third-party trust is critical before people decide which trust is right for them and their loved one.
Third-Party Special Needs Trusts
The major distinction between first- and third-party special needs trusts is who is funding the trust. Simply put, a third-party trust is funded by family members, whereas first-party trusts are funded by the individual with special needs.
Third-party special needs trusts are used by people planning ahead for a special needs loved one. This document can either be included as part of a will, a living trust, or as a standalone special needs trust. For third-party special needs trusts created through a will or as part of a living trust, the special needs loved one will receive funding from the trust after the funder’s passing.
The purpose of a third-party special needs trust is for the family to be able to give to the individual without affecting their eligibility for government benefits. Because the special needs person never owns the property in the trust—and cannot have direct access to these funds—the assets in the trust will not count against them for benefit eligibility. The loved one providing the funds decides how they are utilized—or names a trustee to make this determination. However, there are restrictions. The funds cannot be used for anything that the special needs individual receives government benefits for, like food or housing. Instead, special needs trust funds can be used to purchase items for hobbies, personal services, furniture, computer equipment, and much more.
First-Party Special Needs Trusts
On the other hand, first-party special needs trusts are created by the special needs individual themselves, using funds or property they own. Individuals will often create a first-party trust after they have inherited money or property outright—like from a loved one’s will—or if they receive a court settlement. By putting the assets in a trust, these assets will not be counted when determining eligibility for future government benefits.
Taking care of loved ones is important to many Houston families. For individuals with special needs, creating a trust for them can help ensure they are financially secure in the future. Because of this, individuals interested in making a special needs trust should contact an experienced attorney.
Experienced Special Needs Estate Planning Lawyers
If you or a loved one wants help creating a special needs trust, contact the experienced Houston estate planning attorneys at McCulloch & Miller, PLLC. We have years of experience drafting both first- and third-party special needs trusts and can help your family evaluate which is best for you. Planning for the future can often be stressful, so rely on our experienced attorneys to ensure you and your family’s futures are taken care of. To schedule a consultation and to speak with one of our attorneys, call us today at 713-333-8900.