First-Party Versus Third-Party Special Needs Trusts

Planning for the long-term care and financial stability of a loved one with disabilities often carries deep emotional weight. You want to know they’ll have access to meaningful opportunities, supportive care, and financial resources even when you’re no longer able to provide direct assistance. 

At the same time, you may worry about how receiving assets could affect eligibility for vital public benefits. These concerns are shared by many families, and it’s natural to feel both protective and uncertain when making these decisions. Special needs trusts can help protect assets while preserving eligibility for certain government programs. 

At Denise Jomarron Legal Group, we help Florida individuals and families throughout Miami-Dade County evaluate planning tools that support both security and independence. If you’re ready to discuss options that reflect your family’s priorities, reach out to us today to begin the conversation.

How Trust Law Supports Special Needs Planning

Special needs trusts play a unique role in trust law. They’re designed to supplement public benefits like SSI and Medicaid, not replace them, while preserving assets. 

The goal is to improve the quality of life while maintaining access to programs that cover essential living and medical expenses.

Giving assets directly to a person with disabilities may exceed eligibility limits. Trust law provides a better alternative, with a trustee managing funds under set guidelines. Because the beneficiary doesn’t directly control the assets, those funds may not count against benefit thresholds.

We often see relief on families’ faces once they realize there are legal tools that help balance financial support with benefit protection. Working with an experienced trust law attorney can help clarify how trust law applies to your situation and what structure may align with your long-term goals.

Another important point is flexibility. While the trust must comply with legal requirements, it can still reflect personal wishes, covering education, recreation, therapies, transportation, and other enhancements that contribute to a fuller life.

Planning ahead allows you to focus less on uncertainty and more on creating stability for someone you care deeply about.

Key Features of First-Party Special Needs Trusts

First-party special needs trusts are often created when a person with disabilities already owns assets. These funds might come from a personal injury settlement, inheritance, or accumulated savings. Trust law permits these trusts to allow beneficiaries to retain access to benefits while still using their own resources in a structured way.

Below are several defining characteristics of first-party trusts:

• Funded with the beneficiary’s assets: The funds placed in the trust belong to the individual with disabilities rather than a parent or relative.
  

• Created to preserve benefit eligibility: Trust law allows these arrangements to help prevent disqualification from income- and asset-based programs.
  

• Medicaid reimbursement requirement: When the beneficiary dies, any remaining funds are typically used to repay Medicaid for services received.
  

• Established by authorized parties: A parent, grandparent, guardian, or court usually creates the trust on behalf of the beneficiary.
  

• Managed by a trustee: The trustee oversees distributions so they complement rather than replace government assistance.

These trusts can be life-changing for individuals who receive financial awards yet still rely on public programs. Instead of losing support, they gain a structured way to use their assets.

Still, careful drafting matters. Trust law sets detailed standards, and even small errors could affect how benefits are treated. With thoughtful planning, first-party trusts can help transform a sudden financial event into long-term support.

How Third-Party Special Needs Trusts Differ

Third-party special needs trusts are commonly used by parents, grandparents, or other loved ones who want to set aside funds for someone with disabilities. Unlike first-party trusts, these accounts are funded with assets that never belonged to the beneficiary.

Here are several important distinctions:

• Funded by someone other than the beneficiary: Family members often contribute through gifts, life insurance proceeds, or estate plans.
  

• No Medicaid payback requirement: Trust law typically allows remaining funds to pass to other heirs after the beneficiary’s lifetime.
  

• Greater planning flexibility: Grantors can outline how and when funds are used while tailoring the trust to evolving needs.
  

• Common estate planning tool: Many families incorporate these trusts into wills to avoid unintentionally disqualifying a loved one from benefits.
  

• Can receive contributions over time: Relatives may make gifts, creating a collaborative way to support the beneficiary.

For many families, this structure provides reassurance that resources will remain dedicated to their loved one’s well-being. It also prevents the accidental transfer of assets that could interrupt public assistance.

Trust law continues to shape how these arrangements function, which is why professional guidance often plays a valuable part in the planning process.

Moving Forward With Confidence Through Trust Law

Planning for a loved one with disabilities is an act of care that reaches far into the future. Trust law provides tools to protect resources, support independence, and provide reassurance during uncertain times. Whether you’re evaluating a first-party trust after a financial recovery or building a third-party trust as part of your estate plan, informed decisions can make a lasting difference.

At Denise Jomarron Legal Group, we believe every family deserves guidance that supports thoughtful planning and long-term stability. Our firm serves clients all throughout Miami-Dade County, Florida. If you’re ready to take the next step in creating a plan grounded in trust law, reach out today and build a secure future for the person who matters most.