Trusts for Children

Government benefits, such as Supplement Security Income (SSI) and Medicaid, can be protected for children with disabilities who are receiving money from legal settlements, inheritance, or gifts.

Attorneys, parents, and guardians need to be careful to create the correct type of trust. The supplemental needs trust will be either a first-party trust or a third-party trust. The type of trust used depends on the source of the money and whether that money has legally been attributed to the child.

Alabama Family Trust does not provide legal advice. You should consult with an attorney who is knowledgeable about supplemental needs trusts. The following is provided only for general information purposes.

First-Party Trusts

If a child with a disability receives a gift, inheritance, legal settlement, or judgment from a lawsuit, the proceeds could cause them to lose Supplemental Security Income (SSI) and Medicaid benefits. Creating a supplemental needs trust with Alabama Family Trust can help prevent the child from losing benefits. The trust proceeds can be used over the child’s lifetime to supplement his or her needs to improve the child’s life. However, because the proceeds are considered to be the child’s money, this type of trust requires a Medicaid pay-back provision at the child’s death, to the extent funds are still available in the trust.

Third-Party Trusts

If a parent, grandparent, aunt, uncle, sibling, or friend wishes to give a disabled child money or an inheritance, a third-party supplemental needs trust should be created. The person creating the trust can leave directions in his or her Last Will and Testament or Living Trust to create a supplemental needs trust or a stand-alone trust, naming AFT as the preferred Trustee. The trust proceeds can be used over the child’s lifetime to supplement his or her needs to improve the child’s life. At the child’s death, any remaining funds in the trust can be distributed to any person or entity the creator of the trust designates.

More About Trusts

Please download our brochure to learn more about supplemental needs trusts for children. If you have additional questions, reach out to us today.

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Contact Alabama Family Trust via the contact link below to learn more about special needs trust funds.

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