Basics About Third-Party Special Needs Trust

 Posted on December 09, 2022 in Estate Planning

Estate planning is critical to parents who have a minor or adult disabled child that receives government aid programs. The purpose of estate planning is to distribute one's assets smoothly and cost-effectively. Generally, assets include real estate, life insurance, retirement assets, bank, and savings accounts among other things

One of the key roles of an estate planning lawyer is to assist you and your family to anticipate issues, which may arise because of your death or incapacity. Estate planning is more important for parents who have one or more children, which receive government benefits such as social security disability income.

TWO TYPES OF DISABILITY INCOME

According to the Social Security Administration, The Social Security Administration or otherwise known as “SSA” administers two types of disability programs

FIRST TYPE OF DISABILITY PROGRAM: SOCIAL SECURITY DISABILITY INSURANCE

The first type of disability program is “Social Security Disability Insurance”. Social Security Disability Insurance is designed for disabled individuals who worked sufficient time to pay into the insurance system. Thus, the disabled person worked for a period where they paid into the “insurance system” to receive a benefit for becoming disabled. This type of disabled individual receives insurance and is not needs-based. An inheritance will not disqualify a recipient from government-based benefits due to them working a sufficient period to qualify for the insurance program. Paying into social security disability is like paying into unemployment insurance. An individual works enough time to gain a benefit from the insurance program designed to assist people that become disabled later in life.

THE SECOND TYPE OF SOCIAL SECURITY PROGRAM IS A NEEDS-BASED SYSTEM CALLED SUPPLEMENTAL SECURITY INCOME

Supplemental Security Income is a federal government program that provides government aid and benefits to disabled individuals. This program is administered by Social Security Administration. Unlike Social Security Disability Insurance, this program is not funded by insurance benefits. SSI is a needs-based program where individuals qualify for government assistance such as food, shelter, or clothing

SSI is designed for disabled individuals who have never worked or never worked sufficient time to qualify for social security disability insurance benefits. Health insurance is a critical benefit for disabled individuals. Medicaid is a state-based health insurance program designed for residents with limited income and assets. In Illinois, Medicaid is administered by the State of Illinois. Most SSI disability beneficiaries qualify to receive Medicaid.

THIRD-PARTY SPECIAL NEEDS TRUST 101

According to the Special Needs Alliance, a third-party Special Needs Trust is also referred to as a Supplemental Needs Trust, funded with assets belonging to a person other than the disabled beneficiary. The purpose of the Third-Party Special Needs Trust is to distribute one’s assets to a disabled person that qualifies for Supplemental Security Income (SSI)

The benefit of the Third-Party Special Needs Trust is the ability to enable a disabled person to continue to qualify for the government-needs-based social security disability system. Unlike the first-party Special Needs Trust, there is no "payback" provision in case of the disabled person's death. With a First-Party Special Needs Trust, the Special Needs Trust must pay back the government for expenditures to financially support the needs-based disabled person.

KENDALL COUNTY SPECIAL NEEDS TRUST ATTORNEY 

Peace of Mind Asset Protection, LLC is an estate planning law firm based in Yorkville, Illinois. Our estate planning and special needs trust lawyers assist individuals and families with special needs estate planning. We regularly set up special needs trusts and work with disabled individuals and their families to assist them with their estate planning and special needs trust planning. Contact your Yorkville Special Needs Trust attorney today at 630-882-2467 or contact us via the online contact form for a free initial consultation.

Sources:

https://specialneedsalliance.org/special-needs-trusts-and-personal-injury-settlements/

https://ssa.gov

Social Security Fact Sheet

Social Security Disability and Supplemental Security Income

https://specialneedsalliance.org/the-voice/your-special-needs-trusts-snt-defined-2/