What Is a Special Needs Trust?

A special needs trust is a legal arrangement and fiduciary relationship that allows a disabled or chronically ill person to receive income without reducing their eligibility for the public assistance disability benefits provided by 澳洲幸运5官方开奖结果体彩网:Social Security, 澳洲幸运5官方开奖结果体彩网:Supplemental Security Income (SSI), or Medicaid. The trust will supplement the beneficiary’s government benefits but not replace them.

How a Special Needs Trust Works

A special needs trust helps cover an individual's financial needs that aren't covered by public assistance payments. The assets held in the trust don't count when qualifying for public assistance. Proceeds from this ty🃏pe of trust are commonly used for medical expenses, payments for caretakers, and transportation costs.

The party who creates the trust is the grantor. They'll designate a trustee who will have control over the trust. This trustee will also oversee its management and the disbursement of funds. The 澳洲幸运5官方开奖结果体彩网:beneficiary will receive the assets.

A third-party special needs trust, commonly called a supplemental needs trust, is funded with assets belonging to a person other than the beneficiary. Funds belonging to the beneficiary may not be used to fund the trust. Funding may come from gifts, an inheritance, or proceeds of 澳洲幸运5官方开奖结果体彩网:life insurance policies. 

A self-funded or first-party special needs trust allows 澳洲幸运5官方开奖结果体彩网:people with disabilities to place their own money into a special needs trust and still be eligible for certain benefits under SSI and Medicaid programs. These trusts only hold assets that belonged to the beneficiary ജwith disabilities before the funds are placed into the trust.

Assets originally belonging to the person with disabilities that are placed into the trust may be subject to Medicaid's repayment rules but assets provided by third parties, such as parents, are not.

Benefits of a Special Needs Trust

Establishing a special needs trust can have benefits for both the grantor and the beneficiar𝓀y. The beneficiary receives financial support without putting their eligibility for income-restricted programs or services in jeopardy. The person or entity that contributes to the trust is reassured that the proceeds will go to expenses they stipulate.

Th📖e individual who creates the trust or their legal representative must define the terms of the trust documents very carefully to ensure their validity and to co🍒nfirm that the directives and purpose of the document are explicitly clear.

The special needs trust must be established before the beneficiary turns 65.

The Bottom Line

A special needs trust is a popular strategy for those who want to help someone in need without risking that person's eligibility for programs that require their income or assets to remain below a certain limit. It can be established by the disabled individual or by a third party on their behalf.

Correction—May 31, 2025: This article has been corrected to state that a third-party special needs trust can be either revocable or irrevocable.