Using a Special Needs Trust

legal trust

The Special Needs Trust (also known as Supplemental Needs Trust) is created to transfer property or money to a person who has a serious disability. This trust is used to wisely manage the money for the person with disability. The trust allows a person with disability for maintaining the eligibility for the government benefits, primarily Supplemental Security Income (SSI) and Medicaid.


The guidelines of Special Needs Trust are complicated and dependent on various factors:

  • Age of Disabled Person: If under the age of 65 or 65 and above
  • Whose Money is used For Establishing Trust: The funds of disabled person in a ‘self-settled’ trust or third party funds, like a parent in a ‘third-party’ trust.
  • Types of Benefit: Every public benefit program has various rules of financial eligibility, which all treat the Special Needs Trust slight differently. Hence, even the similar SNT for the same client have varied effects on that client’s various benefits.

Types of Trusts

There are two types of Special Needs Trust:

  1. Self-Settled Special Needs Trust

These are usually created by a legal guardian, parent or grandparent using the assets of child for funding the trust. For instance, when a child receives settlement from personal injury lawsuit and will need lifelong care. If the assets will remain in the Trust even if the death of a child, a payback to the state is needed, however only to the extent the child receives the public assistance benefits.

  1. Third-Party Special Needs Trust

These are created by using the assets of the parents as a part of an estate plan; distributed by a living trust or will.

These types of Special Needs Trust have following things in common:

  • They Are Irrevocable

If the heir asks the trustee to dissolve the trust and get all of their money back, then it must be deemed as an available asset. Thus, it must be irrevocable to work as a Special Needs Trust. Additionally, the heir does not have the right to direct the use of corpus or sell their beneficial interest.

  • Heir must be disabled

Not everyone can use Special Needs Trust. The heir must be determined as disabled, as describe by the Social Security Administration for the purposes of Social Security Disability Income and Supplemental Needs Trust eligibility. The persons who do not receive these benefits are determined as disabled by the state Medicaid program.

  • Payback to the State upon Death

The state Medicaid program must be entitled to receive the funds that remain in the trust on the death of heir. For pooled trust, the non-profit trustee organization will receive the inheritance. In a third-party trust, Payback is not required.

  • Must Preserve Public Benefits

The trust agreement established a Special Needs Trust stipulating that trustee cannot do anything with the funds that would impair the heir’s eligibility for the public benefits. For example, the trustee cannot provide cash disbursements to the heir.

Importance of Special Needs Trust

You must create a Special Needs Trust and transfer the assets into it, in case you want to give it to a person with disabled condition during your life or after you pass away. The main objectives of making a special need trust are:

  • To allow the trustee who have the fiduciary duty for managing the money and use it for the benefit of the person with disability. The disabled person might not be able to manage the money his/her on his own, so why it is essential. The other reason validate that assets do not cause loss of access to Medicaid or other government benefits that disqualifies the people with many resources.
  • When you name a trustee and heir to create a special needs trust, you must specify that what is to be done with the money that is in a trust. The trustee has the responsibility to both follow the instructions and use assets and money is Special Needs Trust for the purpose that benefits the disabled people.

Get the Help of an Attorney for Social Security Planning

There are strict guidelines for creating a Special Needs Trust, best means of Social Security Planning. You want that they no mistake is done by you and end up helping you disabled loved one to not to lose the access the government benefits. When you begin the procedure to provide aid to your disabled loved one, you must speak to an attorney.

As an attorney, we can help you in determining if special needs trust is the appropriate choice for your situations and I can provide assistance with making and funding the trust.

Article written by Atty Ryan Zenk, Elder Law Center of Wisconsin

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