There are two types of special needs trusts: self-settled and third-party. The following is an overview of the important differences between self-settled and third-party special needs trusts.
A self-settled trust is created using the assets of the disabled person, also known as the beneficiary. A third-party trust is created with the assets of someone other than the beneficiary, such as a parent or grandparent.
Self-settled trusts are also sometimes called first-party trusts. Both types of trusts have different rules and requirements.
A self-settled trust must be established by a parent, grandparent, guardian, or court. The trustee may not be the beneficiary or a family member of the beneficiary. The trust must have a written document that explains how the assets will be used to benefit the disabled person. The document must also state that upon the death of the beneficiary, any remaining assets in the trust will pay back any government benefits received by the beneficiary.
A third-party trust does not have to be established by a parent, grandparent, guardian, or court. The trustee can be anyone chosen by the person who creates the trust, including the beneficiary. There is no requirement that the trustee be related to the beneficiary. The trust does not need to be a document. It can be an oral agreement.
These are the important differences between self-settled and third-party special needs trusts. However, this is not a complete overview of the differences between the two. If you are interested in learning more about these special needs trust options, you should consult a Buffalo Grove special needs trusts attorney. Visit Buffalo Grove special needs trusts attorney at Orlowsky & Wilson Ltd. to request a consultation today.
