Client & Payment PortalSpecial Needs Trusts
Providing for Individuals with Disabilities While Preserving Government Benefits
A Special Needs Trust (also known as a Supplemental Needs Trust) is a vital estate planning tool designed to provide financial support for an individual with a disability without jeopardizing their eligibility for essential government benefits, such as Supplemental Security Income (SSI) or Medicaid. The goal of a Special Needs Trust is to supplement, rather than replace, public government benefits. We assist clients in navigating the complexities surrounding establishing and administering these trusts to ensure that a loved one’s needs are met throughout their lifetime.
Frequently Asked Questions About Special Needs Trusts
The primary goal is to manage assets for the benefit of an individual with physical or mental disabilities while maintaining their eligibility for means-tested government programs. Because these programs often have strict asset limits, an inheritance or legal settlement paid directly to the individual could result in a loss of government benefits. A properly drafted Special Needs Trust ensures those funds are available to pay for items and services that government benefits do not typically cover.
A First-Party Special Needs Trust is funded with the beneficiary’s own money, often from a personal injury settlement or an inheritance received directly. Under federal and state law, these trusts must include a provision stating that upon the beneficiary’s death, the state is reimbursed for the cost of medical assistance provided through Medicaid during their lifetime. Conversely, a Third-Party Special Needs Trust is typically created and funded by parents, grandparents, or other loved ones for the benefit of the disabled beneficiary. This type of trust does not require a Medicaid payback provision upon the beneficiary’s death.
The trust is intended to provide supplemental support in conjunction with government benefits. This includes a wide range of expenses, including but not limited to, paying providers directly for healthcare services not covered by Medicaid, reasonable vacations, education, transportation, medical equipment, entertainment, household items, and as of September 30, 2024, food is also an allowable expense.
Choosing a Trustee is a critical decision. The Trustee must not only be trustworthy and financially responsible, but also familiar with the complex and evolving federal and state government regulations regarding benefit eligibility. Many families choose to appoint a corporate Trustee, such as a trust company, or a combination of a family member and a corporate Co-Trustee, to relieve the burden on the family members.
An ABLE (Achieving a Better Life Experience) account is a tax-advantaged savings account for individuals with disabilities that began prior to age 26 (or 46 for tax years beginning after December 31, 2025). While both allow for some degree of asset preservation, ABLE accounts have annual contribution limits, a maximum balance limit for SSI purposes, more limited rules regarding distributions, and are potentially subject to a Medicaid payback claim. A Third-Party Special Needs Trust on the other hand has no annual limit on the amount of assets that can be contributed to it or that it can hold, is not subject to a Medicaid payback claim, and offers more flexibility surrounding distributions for the benefit of the beneficiary.
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Signs That You May Need Us
If you’re unsure whether you need an estate planning attorney, consider these signs:
- Have significant assets, including life insurance
- Want to minimize or defer estate taxes
- Want to minimize capital gains taxes
- Want to avoid probate
- Want to leave assets to charity
- Own a business and need to plan for successor(s)
- Are concerned about long-term care
- Are concerned about complex disposition of assets due to family dynamics
- Have a second marriage and children from prior marriage(s)
- Have descendants or other beneficiaries who are incapable of managing their own assets
- Want to protect the assets you leave your descendants from creditors and divorce
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