Although each situation varies, and there are many factors to consider, you may want to set up a special needs trust to provide for your child. A special needs trust may be a useful tool for a disabled individual who is receiving, or will receive, government benefits.

The special needs trust allows money to be set aside for the disabled individual without jeopardizing his/her eligibility for government benefits. There are two basic types of special needs trusts: a first party special needs trust, and a third party special needs trust.

  1. First Party Special Needs Trust: is used for the disabled individual who has already received a sum of money, usually through a lawsuit settlement or an inheritance. Those funds can be placed in the special needs trust in order to help the individual qualify for government benefits.
  2. Third Party Special Needs Trust: is used when the trust will be funded with money from other people. The most common scenario is for parents (or other family members) of a disabled individual to fund the special needs trust through their own will or trust, although it can also be funded during the lifetime of the donor(s). Similar to a first party special needs trust, funds placed in a third party special needs trust do not disqualify the recipient from certain government benefits.

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