A special needs trust (SNT) is a legal arrangement designed to provide financial support for individuals with disabilities while preserving their eligibility for government benefits like Medicaid or Supplemental Security Income (SSI). This trust allows loved ones to set aside funds for a person with special needs without affecting their access to these crucial benefits.
What is a special needs trust?
A special needs trust benefits someone with a disability by providing additional financial resources while ensuring they remain eligible for government assistance. A trustee manages the trust’s funds and distributes them to meet the beneficiary’s needs, ensuring they get support while still qualifying for government benefits.
Two main types of special needs trusts exist: a first-party special needs trust and a third-party special needs trust.
A first-party special needs trust is funded by the beneficiary’s assets, such as a personal injury settlement. This trust ensures that the funds do not interfere with eligibility for benefits.
With a third-party special needs trust, family members or friends fund this trust, often as part of an estate plan. It supplements government benefits, covering additional needs such as education, entertainment, or travel.
How does a special needs trust work?
The trustee manages the funds in a special needs trust and ensures they only benefit the beneficiary. The funds can cover a range of expenses not typically provided by government programs, such as:
- Medical and dental expenses
- Education and vocational training
- Transportation
- Personal care attendants or home health care
- Recreational activities and hobbies
The key to a special needs trust is that the money must not count as income or assets in the eyes of government agencies. Using the funds for expenses that could be considered income or assets may disqualify the beneficiary from receiving Medicaid, SSI, or other benefits.
Benefits of a special needs trust
A special needs trust preserves the individual’s eligibility for public benefits. It also provides peace of mind to families, knowing that the person with special needs will have financial support for things that government programs do not cover.
Additionally, because the trustee manages the trust, families can ensure the appropriate use of funds. This setup guarantees that the person with special needs will continue to receive care and support even if family members are unable to manage their affairs.
A special needs trust offers a way to provide financial support for individuals with disabilities without jeopardizing their eligibility for government benefits. The trust ensures the beneficiary’s needs are met while maintaining access to essential programs.
