Which type of special needs trust uses the disabled person's own money as the source of funds?

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

Answer: (A)

The type of special needs trust funded with the disabled person’s own money is a first-party special needs trust. In this setup the beneficiary’s own assets—such as a settlement, inheritance, or other personal funds—are placed into the trust to supplement, not replace, their needs while preserving eligibility for needs-based benefits like SSI and Medicaid. Because the funds belong to the beneficiary, the trust must be irrevocable and usually includes a Medicaid payback provision, so any Medicaid benefits paid during the beneficiary’s life can be reimbursed from the trust upon their death. This structure allows continued access to government benefits while enabling extra support through the trust.

By contrast, a third-party special needs trust is funded with someone else’s money (family members, for example) and typically does not require Medicaid payback, since the assets aren’t the beneficiary’s. Irrevocable life insurance trusts and generation-skipping trusts have other goals and are not the type of special needs trust funded with the beneficiary’s own funds.