Comprehensive estate planning throughout your life can benefit you and your loved ones. Trusts are an effective way to provide assets to loved ones without your property passing through probate court. Trusts can also be used to provide assets to a loved one without jeopardizing the state benefits they rely on to live. This is a special needs trust. A trust attorney can help you and your loved one create a trust that provides them with the most benefits and protects their interests.

Individuals who receive Supplemental Security Income (SSI), Medicaid, and other government benefits programs cannot have more than a certain value of assets. If they exceed these limits, they are no longer eligible to receive necessary monthly support. Unfortunately, these forms of income do not often provide disabled individuals with enough to support themselves or cover their care. A special needs trust can help provide necessary support and additional financial security.

Understanding a Special Needs Trust

A special needs trust is often created by an individual with a mental or physical disability who needs the support of a benefits program or a loved one looking to provide support for a disabled family member or friend. Funding for the trust could come from an inheritance, life insurance policies, or gifts.

When you create a special needs trust, you name a responsible family member, friend, or professional to oversee the trust as the trustee. It is an irrevocable trust, which is a type of trust that cannot be altered without the permission of all beneficiaries. An irrevocable trust also has certain tax benefits during the life of the trust’s creator, and it protects assets more effectively from creditor claims than a revocable trust.

Because a trust is a separate legal entity, a beneficiary does not own the assets in the trust. They have access to supplemental financial support from the trust when needed, but this does not threaten the asset limits of their benefits.

Types of Special Needs Trusts

There are three main types of trusts, depending on who creates and funds them:

  • First Party or Self-Settled Trust: This trust is funded with the assets of the beneficiary of the trust and is created by a disabled person to protect their own assets. In order for these assets to be counted toward one’s own property, the creator of the trust must be under the age of 65.
    Funding may come from personal past income, assets, a civil claim settlement, or an inheritance. These trusts must be irrevocable and provide reimbursement for Medicaid after the death of the creator and beneficiary. The benefits are also only for the beneficiary’s benefit.
  • Third Party: These are created and funded by a loved one, such as the legal guardians of a disabled person. These trusts are not required to pay back Medicaid upon the death of the beneficiary but instead are in the hands of the creator of the trust.
  • Pooled Trust: Pooled trusts are typically created by non-profit organizations and must be managed by a trustee who is part of a non-profit organization. A pooled trust may provide benefits for multiple individuals, taking funds from the individuals, their families, and the community.

An attorney can help you review your options for creating a trust for yourself or a loved one and determine what would be most effective for your unique financial circumstances.

What Can a Special Needs Trust Be Used for?

A special needs trust should be used to cover costs that are not covered by governmental benefits. These may include uncovered medical costs, the cost of at-home care or a caretaker, or excess transportation costs. Trusts provide supplemental support rather than replacing much-needed benefits, and they give a person relying on these benefits more peace of mind that they will be cared for in an emergency.


Q: What Is a Special Needs Trust?

A: A special needs trust is an irrevocable trust used to support the financial well-being of a disabled person relying on state benefits without threatening their ability to be eligible for those benefit programs. These benefit programs have asset limits but do not often cover the medical and other personal needs of people who are disabled. A special needs trust allows a person to access funds when needed without being disqualified from the benefits they need to survive day-to-day.

Q: How Much Does a Special Needs Trust Cost?

A: The cost of any trust, special needs trust or not, will vary based on several factors. This includes:

  • The complexity of the trust’s assets
  • Whether there is one or multiple beneficiaries for the trust
  • The state jurisdiction that governs the trust and its assets
  • Whether you create the trust with the legal support of an attorney
  • The maintenance costs of the trust
  • Whether financial professionals are needed

Working with an attorney, though costly, can help you create a more effective and enforceable trust.

Q: What Is the Ideal Trust for a Disabled Person?

A: A special needs trust, also called a supplemental needs trust, is the ideal trust for a disabled person. It is an irrevocable trust, making it a separate legal entity managed by a trustee. A disabled person can access the funds in the trust when necessary without being disqualified from their only source of constant support due to owning too many assets. It is a supplemental source of income that anyone can create for their loved ones.

Q: What Are the Disadvantages of a Special Needs Trust?

A: There are some disadvantages to creating a special needs trust, including:

  • A beneficiary does not have control over the funds in a trust and must rely on the trustee to provide the relevant funds. This can be frustrating for some, particularly if a trustee was incorrectly chosen and does not honor the beneficiary’s requests.
  • When the beneficiary dies, the trust has to reimburse Medicaid.

Contact Stange Law Firm to Create a Special Needs Trust

If you would like to create or fund a special needs trust, an attorney can help you create one. Effective estate planning is useful whether you are disabled or you want to provide for a disabled loved one. At Stange Law Firm, we can help. Contact us today.