Special Needs Trust

A special needs trust (SNT) is a legal arrangement allowing a person with a disability (beneficiary) to hold assets, receive gifts, or inherit money without losing eligibility for government benefits like SSI or Medicaid. It is used for supplemental needs, such as care, education, or recreation, not covered by public benefits.

Key Aspects of Special Needs Trusts

• Eligibility: The beneficiary must have a disability recognized by the Social Security Act.

Types of Trusts

• First-Party SNT: Funded with the beneficiary’s own money, such as from a lawsuit settlement or inheritance. It must be created by a parent, grandparent, legal guardian, or court.
• Third-Party SNT (Supplemental Needs Trust): Funded by someone else, such as parents or family members, for the beneficiary.
• Pooled Trust: Managed by a non-profit organization.
• Rules for Spending Money: The trustee must not give cash directly to the beneficiary, but instead pay providers directly for goods and services. Funds are used for expenses such as home care, transportation, specialized equipment, and sometimes housing.
• Death of Beneficiary: For first-party trusts, the state must be reimbursed for Medicaid expenses upon the beneficiary’s death. Third-party trusts often allow the remainder to go to other beneficiaries, such as family members or charity.
• Common Misconceptions: A major misconception is that a disabled person cannot have assets. An SNT allows them to have assets without losing benefits. Another is that a trust is only for children; it can be for any age.