Actions during your lifetime: Establish a Third Party Supplemental Needs Trust for your child with a disability.
Read why Third Party SNT's are so useful and popular
It is natural to want to make the resources of your immediate and extended family available to your child with a disability without jeopardizing his or her eligibility for means-tested government benefits (e.g., SSI, Medicaid, food stamps and housing subsidies). This is the reason why a Third Party Supplemental Needs Trust (a “3rd Party SNT”) is so useful and popular. A 3rd Party SNT can be established by an extended family member for the benefit of your child with a disability at any time during the child’s lifetime. You may establish a 3rd Party SNT for the benefit of your child at any time after he or she attains age of eighteen. A 3rd Party SNT can be established by written agreement to be effective immediately or by Will to be effective when the maker of the Will (either you or an extended family member) dies. If members of your extended family intend to gift large amounts for the benefit of your child with a disability, either the family member or you (depending on your child’s age) can establish a 3rd Party SNT by written agreement to be effective immediately. This is called an inter vivos 3rd Party SNT. It can be used as the vessel for gifts from you or other family members to be invested and distributed for the benefit of your child without jeopardizing his or her eligibility for means-tested government benefits. If, on the other hand, the plan is to have resources available to your child only after the death of you and your spouse, you can establish a 3rd Party SNT by your Will. This is called a Testamentary 3rd Party SNT.
The distinguishing characteristic of a 3rd Party SNT is that the money and property used to fund it once belonged to a “third party,” not to your child with a disability. The 3rd Party SNT must never accept the child’s money or property. The trust established to receive your child’s money or property is called a First Party Supplemental Needs Trust (a “First Party SNT”). A second distinguishing characteristic of a 3rd Party SNT is the fact that the creator of the trust can select any person or organization of value to receive the remainder in the trust at the death of your child. This is a distinct advantage the 3rd Party SNT has over a First Party SNT: the remainder in the 3rd Party SNT need not be used to “pay-back” the State for the Medicaid paid on behalf of your child during his or her lifetime. In contrast, a First Party SNT must “pay-back” the State for the Medicaid expended for your child during his or her lifetime.