A Special Needs Trust (SNT) allows you to provide for a disabled loved one without jeopardizing their eligibility for government benefits like SSI and Medicaid.
Types of Special Needs Trusts:
Third-party SNT: Funded by someone other than the beneficiary (typically parents or grandparents). Assets in this trust are not counted for Medicaid or SSI eligibility, and there is no Medicaid payback requirement at death.
First-party (self-settled) SNT: Funded with the beneficiary's own assets (such as an inheritance or personal injury settlement). The beneficiary must be under 65 when established, and a Medicaid payback provision is required.
Pooled trust: Managed by a nonprofit organization that pools funds from multiple beneficiaries for investment purposes while maintaining separate accounts.
What the trust can pay for: Supplemental needs not covered by government benefits — education, recreation, personal care attendants, vacations, electronics, vehicle modifications, and other quality-of-life expenses.
What to avoid: The trust should not pay for food or shelter directly, as this can reduce SSI benefits. A knowledgeable trustee can navigate these rules to maximize benefits.
Working with an attorney experienced in special needs planning is essential to ensure the trust is properly drafted and administered.