Self-Settled Special Needs Trust

A Self-Settled Special Needs Trust Can Help Save Benefits for Utah Residents

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What is a Self-Settled Special Needs Trust?

Self-Settled Special Needs Trust sometimes called a “(d)(4)(A) Trust”, a “First Party Special Needs Trust” or “Payback Trust” is a trust using the funds of a person who is already receiving needs based government benefits such as SSI or Utah Medicaid. The person contributes their own money to the trust which is managed by a manager called a trustee for their benefit. Following the death of the person receiving benefits the government is allowed access to any funds remaining in the trust to “payback” services provided to the beneficiary.

Who is Eligible to Create a Self-Settled Special Needs Trust?

Anyone under the age of 65 is eligible to create a Self-Settled or First Party Special Needs Trust so long as they are competent to do so. If a person is not competent a parent, grandparent, guardian or a court may also create the trust on the individual’s behalf.

When is a Self-Settled Special Needs Trust Used?

A Utah Resident would use a Self-Settled or First Party Special Needs Trust if they receive a windfall that pushes their total assets above $2,000 in total assets. Federal SSI and Utah Medicaid will not continue to provide benefits if a recipient’s assets are greater than $2,000. The Self-Settled Special Needs Trust is an exception to this rule; there is no limit to the amount the Trust can hold.

Example 1: A recipient of government benefits is a passenger in a serious car crash. Insurance payments and court settlements result in a windfall of $20,000. The individual can contribute all of this amount to a Self-Settled Special Needs Trust and will not experience a loss in benefits.

Example 2:  A recipient of government benefits receives an inheritance of $50,000 following the death of his grandma. He can contribute this amount to a Self-Settled Special Needs Trust to avoid losing government benefits.

What is the Difference Between a First Party Special Needs Trust and Third Party Special Needs Trust?

A Self-Settled or First Party Special Needs Trust is created using an individual’s own assets to fund a trust for their own benefit. A Third Party Special Needs Trust is when a parent or other third party sets money aside in trust for the benefit of the individual with special needs without actually giving them access to the funds. This difference is important because the government cannot access funds in a Third Party Special Needs Trust at the death of the beneficiary but can take funds from a First Party Special Needs Trust.  

An ABLE Account May Be the Best Choice

An ABLE ACCOUNT is an account specifically allowed by the federal government to hold up $100,000 totally exempt from the $2,000 asset limit imposed by SSI and Utah Medicaid. In order to qualify for a Utah ABLE Account, the account holder must have a qualifying disability under the Social Security Administration guidelines. The disability must have begun prior to the age of 26. The ABLE Account is free to set up and very inexpensive to maintain (under $50 per year). The Account can receive up to $15,000 per year.

If the windfall amount pushes a person over the $2,000 asset limit, but is still at or under $15,000, they can contribute their funds to an ABLE Account with full access to the money and no need to create an expensive Self-Settled Trust.

Learn More About Special Needs Trust Planning Today: 801-874-5644. 

 

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