A special needs trust funded by gifts or bequests from friends and family, or set up in the disabled person's will, is best described as?

A special needs trust funded by gifts or bequests from friends and family, or set up in the disabled person's will, is best described as?

• A. First-party special needs trust
• B. Third-party special needs trust
• C. Irrevocable life insurance trust
• D. Generation-skipping trust

Answer: (B)

The key idea is that this type of trust is funded with assets that belong to someone else, not the disabled person. When friends, family, or even the disabled person’s own will provide gifts or bequests to a trust for the benefit of the disabled individual, you’re arranging a third-party special needs trust. Because the assets are considered property of the donors (not the beneficiary), they do not count toward the beneficiary’s own resources for means-tested programs like SSI and Medicaid. This lets the person receive government benefits while the trust can pay for additional needs or services that improve quality of life. In contrast, a first-party special needs trust is funded with the disabled person’s own assets and often has a payback provision to Medicaid after the beneficiary’s death. The irrevocable life insurance trust and generation-skipping trust serve different purposes altogether and aren’t described by funding the disabled person’s care with gifts from others.

The key idea is that this type of trust is funded with assets that belong to someone else, not the disabled person. When friends, family, or even the disabled person’s own will provide gifts or bequests to a trust for the benefit of the disabled individual, you’re arranging a third-party special needs trust. Because the assets are considered property of the donors (not the beneficiary), they do not count toward the beneficiary’s own resources for means-tested programs like SSI and Medicaid. This lets the person receive government benefits while the trust can pay for additional needs or services that improve quality of life.

In contrast, a first-party special needs trust is funded with the disabled person’s own assets and often has a payback provision to Medicaid after the beneficiary’s death. The irrevocable life insurance trust and generation-skipping trust serve different purposes altogether and aren’t described by funding the disabled person’s care with gifts from others.