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Special Needs Planning
Planning for a loved one with a disability requires a different approach — one that protects their quality of life without jeopardizing the government benefits they depend on.
Special Needs Planning — Supplemental Needs Trusts
What is a Special Needs Trust?
A Special Needs Trust (SNT) — also called a Supplemental Needs Trust — is a legal arrangement that holds assets for the benefit of a person with a disability without counting those assets against their eligibility for government benefit programs like Medicaid and Supplemental Security Income (SSI).
Without a properly structured SNT, leaving money directly to a person with a disability — even with the best intentions — can disqualify them from the very benefits that pay for their housing, healthcare, and daily support. A SNT lets you provide for them without that risk.
The problem with leaving money directly
Medicaid and SSI have strict asset limits — typically $2,000 or less for an individual. If a person with a disability receives an inheritance or gift that exceeds this limit, they may lose their benefits until the money is spent down. This can mean losing:
- Medicaid coverage for healthcare, therapies, and long-term care
- SSI monthly income payments
- Housing assistance and supported living programs
- Vocational and day program funding
A properly drafted SNT holds the inheritance outside of the beneficiary's countable assets — preserving their benefits while still providing for their needs.
What a Special Needs Trust can pay for
A SNT is designed to supplement — not replace — government benefits. The trustee can use trust funds to enhance the beneficiary's quality of life in ways that government programs don't cover:
Types of Special Needs Trusts
Third-Party Special Needs Trust
Most common for familiesFunded by family members or others
Created and funded by a parent, grandparent, or other family member for the benefit of a person with a disability. Assets in the trust do not belong to the beneficiary, so they are not counted for benefit eligibility. At the beneficiary's death, remaining assets pass to other family members or heirs.
Self-Settled (First-Party) SNT
Settlements & inheritancesFunded with the beneficiary's own assets
Used when the person with a disability receives assets in their own name — through a personal injury settlement, inheritance, or gift. Allows them to preserve benefits while holding the funds in trust. Medicaid payback provisions apply at death.
Pooled Trust
Smaller amountsManaged by a nonprofit organization
A nonprofit organization manages the trust assets in a pooled investment account, with a separate sub-account for each beneficiary. A good option when the trust amount is smaller or when professional management is preferred.
Choosing a trustee for a Special Needs Trust
The trustee of a SNT has significant responsibility — managing investments, making distribution decisions, maintaining benefit eligibility, and filing annual accountings. Choosing the right trustee is critical.
Family member
Pros: Knows the beneficiary personally; invested in their wellbeing
Considerations: May lack financial or legal expertise; family dynamics can complicate decisions
Professional trustee
Pros: Experienced with SNT rules and benefit programs; neutral
Considerations: Ongoing fees; may not know the beneficiary personally
Co-trustees
Pros: Combines personal knowledge with professional expertise
Considerations: Requires coordination; potential for disagreement
Successor trustee
Pros: Ensures continuity if the primary trustee cannot serve
Considerations: Must be identified and willing to serve
Common questions
Can I include a special needs trust in my regular estate plan?
Yes — and this is often the best approach. A testamentary SNT can be created within your will or revocable trust, so it only comes into existence if the beneficiary is still living and still has a disability at the time of your death.
What if my child's disability is not yet diagnosed?
You can draft a trust with a disability trigger — the trust becomes a SNT only if the beneficiary meets the legal definition of disability at the time of distribution. This protects you without locking in assumptions about the future.
Does a SNT affect the beneficiary's Social Security Disability (SSDI)?
SSDI is based on work history, not assets, so a SNT generally does not affect SSDI eligibility. SSI, however, is means-tested — a properly structured SNT protects SSI eligibility.
What happens to the trust when the beneficiary passes away?
For a third-party SNT, remaining assets pass to whoever you designate — other children, grandchildren, or a charity. For a first-party SNT, Medicaid may have a payback claim on remaining assets.
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