What are the differences between a first-party and third-party special needs trust? Watch this video to find out.
In general, a first-party special needs trust is designed to hold funds contributed by the person with disabilities, such as a lawsuit settlement or recovery.
A third-party special needs trust by contrast is designed to hold funds contributed by someone other than the person with disabilities, such as his or her parents, as part of an estate plan (coordinated with a will, beneficiary designations, etc).
A first-party trust is usually subject to more strict rules than a third-party trust, such as the requirement that all distributions be for the sole benefit of the person with disabilities, requirement to repay Medicaid, etc. In general, these requirements usually don’t apply to third-party trusts.
It’s important not to mix up the two. If you have a question about special needs trusts, call or email FriedmanLaw.