Special Needs Trust

A special needs trust, also known as a supplemental needs trust, is just one aspect of special needs planning.   These trusts are established to provide for the immediate, as well as the future, financial needs of a person who has a disability.

Public benefits are limited as to what they are able to provide.  Typically essential benefits like Supplemental Security Income (SSI) and Medicaid provide only for the bare necessities, such as food, housing and clothing. The purpose of a special needs trust is to supplement but not to supplant the public benefits that the individual with a disability is already receiving or could potentially receive. Three are three types of special needs trusts: (1) Third-Party Special Needs Trusts; (2) Self-Settled Special Needs Trusts; and (3) Pooled Special Needs Trusts.

A special needs trust may be established when the person who has a disability wants to begin utilizing public benefits, but may have more assets than are permitted. A special needs trust can also be established when a person who is already receiving benefits subsequently receives money that raises their assets above their allowable resource limit, such as money from a lawsuit settlement or from an inheritance.

Parents establishing a special needs trust for their child should be aware that funds from the trust must not be distributed directly to the disabled child. Instead, the distributions must be made to third parties who provide goods and services for use and enjoyment by the disabled beneficiary. Examples of what the funds from a special needs trust can be used for include:

  • Education
  • Out-of-pocket medical and dental expenses
  • The purchase of a vehicle
  • Recreational activities
  • Trips or vacations
  • Entertainment
  • Purchase of goods and services that add pleasure and quality to life such as a laptop or other electronics, internet service, furniture, etc.
  • Professional therapy and behavior management, except for that care that would be provided by Medicaid