Special Needs Trusts

Special Needs Trusts: Ensuring Care for Disabled Loved Ones


When it comes to providing for a disabled loved one, there are many considerations to take into account to ensure they receive the care they need without compromising their eligibility for vital government benefits. One key tool in achieving this balance is a Special Needs Trust (SNT). An SNT allows a person with a disability to have an account that can pay for supplemental needs while still qualifying for programs like Medicaid and Supplemental Security Income (SSI).

What is a Special Needs Trust?

Special Needs Trusts, also known as Supplemental Needs Trusts, are carefully crafted legal arrangements. They are designed to hold assets for the benefit of an individual with disabilities, without disqualifying them from receiving public assistance. This trust can be used to pay for expenses that government benefits do not cover, such as personal care attendants, out-of-pocket medical expenses, and other life-enhancing expenditures.

Types of Special Needs Trusts

There are primarily two types of Special Needs Trusts:

  • First-party trusts: These are funded with the beneficiary’s own assets, perhaps from an inheritance or a legal settlement. They must include a payback provision to reimburse Medicaid upon the beneficiary’s death.
  • Third-party trusts: These are funded with assets belonging to someone other than the beneficiary, typically parents or other family members. Unlike first-party trusts, they do not require a Medicaid payback provision.

Why Establish a Special Needs Trust?

The reasons for establishing an SNT are numerous, but they revolve around the beneficiary’s quality of life. Here are a few:

  • Protecting Eligibility for Public Benefits: Properly structured, an SNT will not affect a disabled individual’s eligibility for benefits like Medicaid or SSI.
  • Providing Financial Security: An SNT ensures that the beneficiary has the financial means to pay for additional services and care that are not covered by public assistance.
  • Peace of Mind: For family members, creating an SNT is a proactive step in planning for the future care of their disabled loved one.

Choosing the Right Trustee

Selecting a trustee is one of the most important decisions in creating an SNT. A trustee manages the trust’s assets and makes all decisions related to disbursements. The trustee should be someone who is not only trustworthy but also has an understanding of the beneficiary’s needs and the complexities of government benefit programs.

Setting Up a Special Needs Trust

Establishing an SNT requires careful planning and adherence to legal standards. Here's an overview of the process:

  1. Assess the Beneficiary’s Needs: Determine what the beneficiary's future needs may be, including medical care, living arrangements, and personal care.
  2. Choose the Type of Trust: Decide whether a first-party or third-party trust is more appropriate based on the source of the funds.
  3. Select a Trustee: Choose a responsible party or professional to manage the trust.
  4. Create the Trust Document: A legal document must be drafted by an attorney that specializes in disability and trust law.
  5. Fund the Trust: Transfer assets into the trust, being careful not to interfere with benefit eligibility.

Considerations for a Special Needs Trust

When planning for an SNT, it’s important to consider:

  • The long-term needs of the beneficiary.
  • Current and anticipated future assets.
  • Eligibility for government benefits.
  • Who will manage the trust after the primary caretaker can no longer do so.

Conclusion: Plan with Confidence

A Special Needs Trust is a vital tool for ensuring the well-being of a disabled loved one without jeopardizing their access to public benefits. While the process may seem complex, with the right guidance and planning, you can secure a stable financial future for those who need it most.

If you’re considering setting up a Special Needs Trust, Donohue, O’Connell & Riley can provide the expertise and support necessary to navigate these delicate matters. Contact us to discuss how we can tailor an SNT to fit the unique needs of your family and provide the peace of mind that comes from knowing your loved one is cared for.


January 22, 2024