Car accidents, slip and falls, or cases of medical malpractice can result in injuries that lead to a permanent disability. If your loved one has suffered a traumatic brain injury, spinal cord injury, amputation, vision loss, or other disabling condition as the result of another party’s negligence, he may be entitled to file a personal injury claim.

Personal injury claims provide money for medical care, lost wages, and pain and suffering, However, these settlements can often jeopardize eligibility for need-based programs such as Medicaid, SSI, Section 8 housing, and SNAP. If your loved one has received a personal injury settlement related to his disability, putting the funds in a special needs trust is the safest approach. Trusts after a personal injury Alperin Law

About First-Party Special Needs Trusts

Special needs trusts that are funded with the beneficiary’s personal assets are called first-party special needs trusts; those that are funded by a parent or other family member’s assets are called third-party special needs trusts. Personal injury settlements are a common source of funds for a first-party special needs trust, but a trust of this type could also be funded with an inheritance, divorce settlement, life insurance proceeds, or other lump-sum payments.

A first-party special needs trust created to preserve government benefits must be an irrevocable trust. This means, the trust can’t be terminated after it is established, nor can the terms of the trust be easily amended.

To set up a first-party special needs trust, the beneficiary must be under age 65 and suffer from a condition that meets the definition of disability under the Social Security Act. The trust itself must be established by a parent, grandparent, legal guardian, or the court.

The beneficiary of a first-party special needs trust can’t serve as the trustee, so a family member or neutral third-party must be enlisted to manage the trust assets. Banks, trust companies, attorneys, and social service agencies are a few of the options that are available to individuals with no family member or friend who is willing and able to act as the trustee.

To gain the full asset protection benefits, the funds in a special needs trust can’t be used indiscriminately. They may only be used to pay for expenses that are not covered by other government programs and will enhance the disabled beneficiary’s quality of life. This includes transportation, education, recreation, travel, and health care expenses not covered by Medicaid. The funds can’t be used to pay for food or housing expenses such as rent and utility costs. Giving cash disbursements outright would immediately result in a reduction in public benefits.

A first-party special needs trust typically has a payback provision that requires the funds left in the trust when the beneficiary passes away to be used to repay the value of the government benefits he previously received.

Sometimes, a first-party special needs trust is referred to as a self-settled special needs trust, payback trust, or (d)(4)(A) trust.

How Alperin Law Can Help

Special needs trusts have strict requirements that must be met to ensure the funds are managed properly and that the beneficiary’s eligibility for government assistance remains intact. To set up a trust that best protects the beneficiary, the following variables must also be considered:

  • Funds used to create the trust
  • Anticipated income needs
  • Anticipated expenses of the beneficiary
  • Beneficiary’s age and health
  • Rules for public benefits the beneficiary is currently receiving
  • Rules for public benefits the beneficiary may need to receive in the future
  • ABLE account or other savings vehicle the beneficiary may plan to have

Do You Have A Family Member Or Loved One Who Requires Special Needs Legal Planning?

If you are responsible for a family member or loved one who requires special needs legal planning you should speak with an experienced special needs planning attorney as soon as possible. Contact us online or call our Virginia Beach office directly at 757.490.3500 to schedule your free consultation. We have offices throughout Virginia including Chesapeake, Newport News, Norfolk and Suffolk.


Scott Alperin
Experienced Estate Planning & Elder Law Attorney Serving Virginia Beach Area Clients Since 1994.