Keeping it Simple

A special needs trust may be a good idea for someone who has a child or other family member with disabilities. The purpose of a trust like this is to help provide for an individual without hindering their ability to receive government aid.

Reasons to Establish a Special Needs Trust

The main reason for starting a special needs trust is to provide for an individual with special needs throughout his or her life. If they do qualify for federal and state benefits, you will want to ensure this eligibility will continue for as long as needed.

One reason to establish a special needs trust may be to ensure eligibility for Medicaid. To qualify, the person with special needs’ assets must be below a specific amount, which can be different from state to state. With this kind of trust, assets are restricted from the beneficiary, making them uncountable and allowing the disabled individual to continue to receive benefits.

Additionally, one might be interested in a special needs trust to preserve qualification for Supplemental Security Income (SSI). Individuals with disabilities frequently receive cash benefits from SSI for things such as housing and food. Because benefits are considered under a needs-based category, it is possible to lose eligibility for a program like this if the individual were to inherit money. By naming a special needs trust as your beneficiary instead of naming your child, however, assets can be devoted to the care of your loved one. A special needs trust may also be useful in providing care that is non-essential. Things like dental care and eyeglasses are not covered by Medicare, but are still necessary expenses.


To go along with government benefits, the trust must be drafted in the right way. Some things that generally apply to all special needs trusts are that they have to be set up by a parent, grandparent, legal guardian or court. Additionally, funds in the trust cannot be accessible to the beneficiary.

Types Available

A third party special needs trust is funded with assets that don’t belong to the beneficiary. For example, it could be created by a parent and funded with cash. After the death of the beneficiary, the assets are distributed to whoever is designated.
A self-settled special needs trust is funded with assets that belong to the beneficiary. For example, it could be established with an inheritance or personal injury award.

Methods of Funding

It is typical for a special needs trust to be set up during the lifetime of the creator. In most cases, after the death of the parent, the child with special needs’ portion of the inheritance will transfer to the trust. Special needs trusts are typically funded using cash, life insurance, investments or other assets with advantages and disadvantages to each.

Other Things to Consider

When establishing a special needs trust, it is important to select a trustee, or person in charge of managing the trust. This person is expected to fulfill the objectives stated in the trust document. Additionally, if a trust of this sort is set up through a document like a will, it is a good idea to provide a letter of intent to describe certain wishes for your child’s care after your death. Also, being clear with other family members about the split of your inheritance may help avoid family conflicts. Lastly, when dealing with the complexity of special needs planning, you might find the help of an attorney or financial professional to be helpful.

To learn more about special needs trusts, email Mike or call him at 314-822-0344.