A First Party Special Needs Trust is a type of SNT where the trust is funded with the assets of the disabled person. Typically, these type of SNT are created when the disabled person receives an inheritance, gift, or a settlement from a law suit.
The one draw back to the First Party Special Needs Trust is that it must contain a Medicaid Payback provision. The effect of this provision is that when the disable person passes away, any funds left over in the SNT will be used to cover any funds that Medicaid provided during his or her lifetime. However, the benefit of maintaining Medicaid typically far outweighs the Medicaid Payback provision.