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Third-Party Trusts

Nashville Attorney Skilled in Estate Planning Matters

Depending upon one’s individual needs, trusts can be a useful estate planning tool. There are several different types of trusts, each of which is designed to effectuate a certain purpose. Some trusts are testamentary, meaning that they take effect when the settlor passes away, while others are inter vivos and go into effect during the lifetime of the person who set them up. Additionally, some trusts are “first-party,” while others are “third-party.” At the Randy Ratliff Law Offices, PLLC, Nashville estate planning lawyer Randy Ratliff regularly advises Tennessee residents on many kinds of trusts. He also can assist with trust administration, trust modification, and other trust-related legal matters.

The terms “first-party” and “third-party” are usually used in reference to so-called special needs trusts. Whether first-party or third-party, the purpose of a special needs trust is to allow the beneficiary to qualify for needs-tested government assistance, such as Supplemental Security Income (SSI), TennCare, or Medicaid, while still receiving the benefit of funds put into the trust to provide a better quality of life. The primary difference between a “first-party” trust and a “third-party” trust is the source of the funds that are to be used for the good of the beneficiary through the trust. In a first-party trust, such as a d4C trust, it is the trustor’s own assets that are placed into trust, whereas a “third-party” trust utilizes the assets of someone other than the beneficiary. Exactly who can and cannot contribute to a third-party trust is a matter of federal law.

Special Needs Trusts Can Allow Disabled Individuals to Qualify for Needs-Based Assistance

The primary purpose of a third-party trust is to administer the assets available to the beneficiary in such a manner that he or she can qualify for needs-tested assistance in situations in which he or she would otherwise be unable to do so because of the value of assets available for his or her use. In order to prevent abuse of the privilege of having the benefit of funds that would otherwise be disqualifying to people seeking aid from the government, numerous rules and limitations are placed on third-party trusts. In many situations, one of the conditions for a third-party trust is that, when the disabled person passes away, any leftover funds in the trust will be paid to the government as remuneration for benefits received during the beneficiary’s lifetime.

If you are considering setting up a third-party trust for the benefit of a loved one with special needs, it is very important that you speak to an attorney who regularly handles this type of legal work. If it is not approached properly, an attempt to provide funds to enhance a loved one’s well-being via a trust can result in numerous problems, including the potential loss of assistance from government programs. A qualified estates and trusts attorney can explain the different types of trusts, both first-party and third-party, as well as options such as a pooled trust, in which several different individuals’ trust funds are managed simultaneously by a nonprofit entity, with each beneficiary having his or her own individual account. Pooled trusts can allow for greater investment opportunities because the combined value of the accounts can provide options that would not be available for more modest, individual third-party trusts.

Seek Guidance from a Trusts and Estates Lawyer in Nashville

Usually, a third-party trust is a component of a larger estate plan designed to provide for the needs of a special needs individual as well as other important individuals in the trustor’s life. The settlor of the trust typically has other heirs and estate beneficiaries to consider, and he or she may also be concerned with issues such as business succession planning as a business owner. The Randy Ratliff Law Offices, PLLC, is available to help families throughout Williamson and Davidson Counties with a variety of estate planning needs. You can contact us by calling 615-656-8282 or completing our online form. We represent people in communities such as Nashville, Franklin, Antioch, Hermitage, Joelton, Madison, Goodlettsville, Brentwood, and Cool Springs.