Setting Up a First-Party Special Needs Trust in Florida: What Families Must Know

When a loved one with disabilities receives a personal injury settlement, inheritance, or retroactive government benefit payment, the financial boost is often seen as a blessing. But without the right legal structure, that money can inadvertently jeopardize their eligibility for critical needs-based programs like Supplemental Security Income (SSI) and Medicaid. 

In Florida, where thousands of families rely on these essential services, it is vital to understand how to protect these benefits while still providing for your child or adult dependent. That’s where a first-party special needs trust comes in.

Understanding the Need: Why First-Party Trusts Exist 

Most government aid programs have strict income and resource limits. For example, to qualify for SSI, an individual typically cannot have more than $2,000 in countable assets. If your loved one receives money directly—through an inheritance, legal settlement, or even accumulated back benefits—that sum is considered theirs and could immediately disqualify them from receiving government aid. 

A first-party special needs trust is designed to hold the assets of the beneficiary (the person with disabilities), shielding those funds from being counted against eligibility for public benefits. This legal tool ensures that the money can still be used to support the individual—paying for medical needs, therapies, education, transportation, and other quality-of-life expenses—without disrupting SSI or Medicaid.

What Makes a Trust "First-Party"? 

The term "first-party" refers to the source of the funds. In this case, the assets being placed into the trust come directly from the individual with special needs. This typically includes: 

• Personal injury settlements 

• Court awards 

• Inheritance funds left directly to them (often accidentally) 

• Accrued government benefit backpay 

Since these funds legally belong to the beneficiary, special federal and state rules apply to how the trust must be drafted and managed. 

The Legal Requirements in Florida 

In order for a first-party special needs trust to be recognized and excluded from countable resources under federal rules, it must meet three primary criteria: 

1. Established by a Qualifying Party: The trust must be set up by the individual themselves (if they are mentally competent), a parent, grandparent, legal guardian, or a court. In many cases, especially when dealing with minors or adults with developmental disabilities, a court-ordered trust is necessary. 

2. Funded with the Beneficiary’s Own Assets: This trust is meant to hold assets that are legally owned by the person with disabilities. It is not to be used for gifts or contributions from others—that’s the domain of a third-party special needs trust. 

3. Include a Medicaid Payback Clause: Upon the death of the beneficiary, any remaining funds must be used to reimburse the state Medicaid program for benefits provided during the person’s lifetime. This clause is non-negotiable and must be clearly spelled out in the trust document. 

If any one of these conditions is not met, the trust will likely be deemed invalid for SSI and Medicaid purposes—potentially causing a loss of benefits and forcing the individual to "spend down" their assets. 

Real-Life Example: The Risk of Not Planning Properly 

Let’s consider the story of 9-year-old Leila, a child in Hollywood, FL, living with autism and epilepsy. Leila was awarded $150,000 in a medical malpractice settlement after years of misdiagnosis and delayed intervention. Her parents were grateful—they finally had resources to improve her therapy, explore assistive technology, and create more stability. 

But no one told them that depositing those funds into a standard bank account would immediately trigger disqualification from Leila’s Medicaid coverage. That meant losing access to essential therapies, pediatric specialists, and home support she’d been receiving through Florida’s Medicaid waiver program. 

In a scramble to avoid benefit termination, the family had to backtrack through emergency court petitions and legal consultations to establish a compliant first-party special needs trust. Had the trust been set up before the funds were disbursed, Leila’s eligibility would never have been at risk—and the process would have been far less stressful and expensive. 

This is exactly why proactive planning matters. 

Why Local Expertise Makes the Difference 

Florida courts and Medicaid programs have their own rules, and it takes a firm that knows both the law and the local system to get it right. From navigating court approvals to understanding waiver program timing, having a Florida-based team by your side ensures you don’t run into delays, mistakes, or unnecessary costs. 

How Legacy Solutions Law Firm Helps Families Like Yours 

At Legacy Solutions Law Firm, based in Hollywood, Florida, we’ve helped families across the state set up trusts that preserve benefits and support lifelong care. Our work goes beyond paperwork—we coordinate with settlement teams, handle court filings, and guide trustees through administration. 

With compassion and precision, we make sure your child’s future stays protected—no matter what life brings. 

Take the Next Step 

If your family is dealing with an inheritance, lawsuit settlement, or any other significant transfer of assets to a person with special needs, the time to act is now. 

Contact our Hollywood, Florida, office to schedule a strategy session.

Call Now

Let’s ensure your loved one receives the benefits they deserve and the financial protection they need.

Reference: SSA Program Operations Manual System (POMS) Section SI 01120.201 – Trusts Established with the Assets of an Individual.