Special Needs Trusts and Related Planning

Special needs trusts help disabled Arizona individuals take advantage of public benefits programs and other planning opportunities.

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A special needs trust is often created to help a disabled person qualify for needs-based government benefits. Needs-based benefits are those provided by the federal or state government to individuals who fall below certain income and resource limits and qualify for Supplemental Security Income (SSI) and Medicaid, or more particularly, the Arizona Long Term Care System (ALTCS).

Through the creation of a special needs trust, an individual with resources in excess of the limits provided by those government programs can still qualify after transferring assets into the trust.

There are multiple types of special needs trusts, such as first- and third-party trusts.

First-Party Trusts

A “first-party trust” is created with resources belonging to the disabled person. If the person owns resources that are valued greater than the resource limit for SSI and ALTCS, the law allows for those resources to be moved over to the trust, making them non-countable in the eligibility determination process.

Common situations giving rise to the need to establish a first-party special needs trust are the receipt by the disabled person of an inheritance or a settlement from a personal injury claim. Consider these key points:

They can only hold assets that belonged to the disabled person, and not someone else’s resources
They must be created before the disabled person turns 65
They cannot be established by the disabled person; only the following may establish a first-party special needs trust: a parent, a grandparent, a guardian or a court.
The State of Arizona must be designated as the primary beneficiary of anything remaining in the trust when the beneficiary dies, for reimbursement purposes.

Third-Party Trusts

The other common type of trust is one created by someone other than the disabled person (most commonly a parent, grandparent or other family member) and is referred to as a “third-party trust.” Since those resources never belonged to the disabled person, they will not count as a resource for those needs-based programs. These trusts allow the trustee full discretion on using the resources for the benefit of the disabled person. Unlike first-party trusts, the state is not a beneficiary, allowing the person creating the trust to designate anyone as a final beneficiary.

Our experienced planning attorneys can help you understand these trusts and guide you toward the creation of the proper trust that will supplement available government benefits.

Attorneys


Charles L. “Chick” Arnold	Marsha Goodman	James E. McDougall


Joshua N. Mozell

Chick Arnold is a Certified Specialist in Estate and Trust Law (Arizona Board of Legal Specialization). Chick chairs the Maricopa County Superior Courts' Task Force on Mental Health Services and is a past chair of the State Bar of Arizona's Elder Law and Mental Health Section.

Marsha Goodman focuses on life care planning to enhance the health, safety and well being of her elderly and disabled clients. She is the 2015-16 Chair-Elect of the State Bar of Arizona's Probate and Trust Section.

Jim McDougall, a former Maricopa County Superior Court judge, helps families deal with issues of incapacity for an incapacitated or disabled relative. He often helps clients obtain a guardianship or conservatorship, and he has represented individuals over whom the guardianship or conservatorship is sought.

For four years between college and law school, Josh Mozell worked in Maricopa County’s public mental health system. During law school, Josh spent two years as a crisis specialist in Maricopa County's Crisis Response Network.