Special Needs Trusts: What You Need to Know
Planning for the future of a loved one with a disability requires thoughtful financial and legal preparation. One of the most effective tools available is a Special Needs Trust (SNT) — a trust designed to protect assets while preserving eligibility for important government benefits such as Supplemental Security Income (SSI) and Medicaid.
What Is a Trust?
A trust is a legal arrangement in which property or assets are managed by one person or organization (the trustee) for the benefit of another person (the beneficiary).
Trusts offer several key benefits:
- They allow you to control how and when assets are distributed.
- They can help reduce estate and gift taxes.
- They enable families to avoid the lengthy and costly probate process.
What Makes a Special Needs Trust Different?
A Special Needs Trust (sometimes called a Supplemental Needs Trust) is specifically created for individuals with physical or developmental disabilities. Its purpose is to improve the beneficiary’s quality of life without jeopardizing access to essential public benefits.
Unlike standard trusts, an SNT includes special provisions to meet the beneficiary’s unique needs — such as funding for medical care, therapy, transportation, education, or recreational activities — while ensuring assets are not counted against income or resource limits for government aid.
How a Special Needs Trust Protects Benefits
One of the biggest advantages of a Special Needs Trust is that the assets held in it do not count toward SSI or Medicaid eligibility limits.
Because the trustee — not the beneficiary — has control over the funds, the government does not consider the trust’s assets as belonging to the beneficiary. This protection allows your loved one to continue receiving critical benefits like healthcare coverage and monthly income assistance.
Without an SNT, leaving money or property directly to a person with special needs through a will or inheritance could cause them to lose eligibility for these programs by exceeding allowable asset thresholds.
Choosing the Right Trustee
Selecting the right trustee is one of the most important decisions in establishing a Special Needs Trust. The trustee will manage the trust’s assets and make spending decisions on behalf of the beneficiary.
You may choose a:
- Trusted family member or friend who understands the beneficiary’s needs, or
- Professional fiduciary, financial institution, or attorney experienced in special needs administration.
If no suitable person is available, the court can appoint a qualified third party to serve as trustee, ensuring your written wishes are followed.
Other Uses for Special Needs Trusts
A Special Needs Trust can also:
- Hold proceeds from a personal injury or legal settlement on behalf of a disabled person, so the funds do not affect benefit eligibility.
- Protect assets from lawsuits or creditors if the person with special needs becomes involved in legal action.
- Supplement future needs, even if the individual currently does not rely on government benefits — providing flexibility for unforeseen circumstances.
These trusts offer peace of mind, ensuring your loved one is financially protected no matter what the future holds.
Why You Should Consider a Special Needs Trust
Even if your loved one currently has sufficient resources or does not rely on public benefits, establishing a Special Needs Trust is still a wise decision. Life circumstances can change, and government support may become essential later.
An SNT ensures that your loved one can:
- Maintain access to government benefits
- Receive additional financial support for improved quality of life
- Avoid unnecessary financial complications in the future
Get Professional Guidance
Creating a Special Needs Trust requires careful drafting and legal expertise to comply with federal and state regulations. An experienced elder law or special needs planning attorney can guide you through the process, help select an appropriate trustee, and tailor the trust to meet your loved one’s long-term needs.
If you’d like to learn more or speak with an attorney about setting up a Special Needs Trust, we’re here to help.
📞 Contact Aging in Maine (207)848-5600 to schedule a consultation and ensure your family’s peace of mind for years to come.
