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Special Needs Trusts

Planning for your child's financial future is as crucial as planning for your own retirement. As the parent or guardian of a loved one with a disability, it's essential to ensure that your adult child will be well taken care of when you're no longer here. One common approach is to establish a Special Needs Trust.

About Special Needs Trusts

A Special Needs Trust (SNT) is created to help a person with a disability receive additional funds, while helping to preserve access to state and/or federal benefits such as Supplemental Security Income (SSI), Department of Housing and Urban Development (HUD) Section 8 subsidies, Medicare, and/or Medicaid. These government benefits have very specific income requirements and limitations, and if the individual receiving these benefits exceeds these limitations, they risk losing these benefits. A Special Needs Trust will help keep these benefits while allowing the individual to have access to funds out of the trust to pay for additional wants and needs that state and federal benefits do not cover.

To qualify for a SNT, the individual (beneficiary) receiving the funds must have a documented disability. This Social Security resource provides a  complete list of recognized disabilities for adults and children.

There are three types of Special Needs Trusts:

  • First-party special needs trusts are funded with the disabled individual’s assets, for example money received from a personal injury settlement or inheritance. 
  • Third-party special needs trusts are funded by someone other than the beneficiary, to provide for the disabled individual without affecting their eligibility for government assistance programs. 
  • Pooled trusts can be first-party or third-party SNTs. They are established and administered by a non-profit association and are sometimes chosen because the responsibility of managing an SNT may be too much for family members or friends to take on.

Transition tip

Third-party special needs trusts are the most beneficial because the government cannot take what is left of the trust to repay Medicaid at time of death.

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Need to know

Trusts must be properly drafted in order to protect a beneficiary’s right to receive public benefits that they are eligible for. It is important to discuss setting up a SNT with a special needs planning attorney.

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Is a Special Needs Trust necessary?

Government programs like Medicaid and SSI provide for the essentials, such as medical care, food, and shelter, but these resources are limited and only cover the basic necessities. Special Needs Trusts are designed to supplement this basic support, and can help with additional needs that the individual may have. For example, families might set up an SNT to help the adult child cover the costs of additional items like furniture, and appliances to live more comfortably. They can then use the trust to help explore things beyond what government benefits can provide. For example, this may include the adult child going on a trip they may not have been able to afford otherwise.

Transition tip

Families often ask about the differences between trusts and ABLE Accounts.  Here is a link to where that information can be found.


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