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Estate Planning 101 - First Party Trusts

June 03, 2019

As mentioned in last week’s article on estate planning, this week will focus more on planning for a beneficiary with special needs.  While there are many strategies worth considering, many times a family will consider establishing a first party special needs trust or a third party supplemental needs trust.


Let’s call this part 1 and focus on the first party or self-settled special needs trust.  This type of legal arrangement would be utilized with money belonging to the beneficiary.  Many times, an individual with a disability lacks significant resources due to a lack of significant earnings.  Because of this, government benefits such as Medicaid and SSI help to provide medical care and financial support.  There are resource limits that cannot be breached in order to qualify for these benefits (which we will discuss further in a future blog post).


How might a child with a disability, who has never worked, have resources exceeding those allowable under the Medicaid and SSI limits?  There are a number of ways, including, but not limited to: inheritances left outright to the individual with the disability, personal injury settlements, insurance proceeds or assets accumulated for the child prior to learning of the resource limits imposed on those looking to qualify for benefits.


If any of the above were the case, a 1st party trust could be established to take ownership of those assets and provide supplemental support for the special needs beneficiary.  There are some guidelines to follow, but as long as they are met, benefits would not be interrupted.


Are there any drawbacks to this type of arrangement?  The biggest would likely be that at the death of the beneficiary of the trust, there is a payback provision.  This allows the state to essentially reimburse themselves for benefits paid over the beneficiary’s lifetime.  Only after that is satisfied and if there was anything left could remaining assets be passed to a contingent beneficiary of the trust. 

Stay tuned to next week’s article when I discuss Third Party Trusts.

Kevin Pent, ChSNC®, Chartered Special Needs Consultant, can be reached at