A special needs trust, sometimes called a supplemental needs trust, holds money or property for the benefit of a person with a disability without placing those assets directly in the beneficiary’s name. When properly drafted and administered, the trust may help provide supplemental support while preserving eligibility for means-tested programs such as Supplemental Security Income and Medicaid.
SSI currently limits countable resources to $2,000 for an individual and $3,000 for a couple. Because benefit rules differ by program and circumstances, an inheritance or direct gift should be reviewed before assets are transferred to a beneficiary who receives public assistance.
A properly drafted special needs trust can give a trustee authority to manage and distribute trust assets for the beneficiary’s supplemental needs. Depending on the trust terms and applicable benefit rules, distributions may support areas such as education, transportation, therapy, recreation, personal care, or other quality-of-life expenses. The trustee should coordinate distributions carefully because certain payments may affect benefit eligibility or payment amounts.
Who Needs a Special Needs Trust:
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Also called a “(d)(4)(A) trust” or “Medicaid payback trust,” this type is funded with the disabled person’s own assets. If your loved one received a personal injury settlement, inherited money, or has substantial savings, a first-party trust can hold these assets while preserving benefit eligibility. Upon the beneficiary’s death, any remaining trust funds must be repaid to Medicaid for benefits paid, but the family can direct the remaining assets to other heirs.
This is the most common type for family planning. Parents, grandparents, or other family members fund the trust with their own assets—typically through their wills or during their lifetime. Because the assets don’t initially belong to the disabled beneficiary, there’s no Medicaid payback requirement. After the beneficiary passes away, remaining trust assets go to whoever you designate.
A pooled trust combines the assets of multiple disabled beneficiaries into a single trust managed by a nonprofit organization. Each beneficiary has a separate account, but the pooled structure can offer administrative efficiency. Like first-party trusts, pooled trusts require Medicaid reimbursement from the beneficiary’s account but can include a carve-out allowing family distributions.
ABLE accounts and special needs trusts can serve different but complementary purposes. An ABLE account can provide a beneficiary with tax-advantaged funds for qualified disability expenses, while a special needs trust can hold and manage broader family or settlement assets under a trustee’s direction. Depending on the beneficiary’s eligibility, funding sources, and long-term needs, one or both tools may be appropriate.
Creating a special needs trust involves thoughtful planning rather than just paperwork. Here’s what you can expect:
We begin by learning about your loved one — their needs, their current benefits, and your long-term goals for their care. We discuss which assets will fund the trust, who will serve as trustee, and any family dynamics that should be factored into the plan.
Some families may also need to evaluate guardianship or other decision-making arrangements for an adult beneficiary.
We examine your loved one’s current government benefits — SSI, Medicaid, or others — to ensure the trust is structured to preserve eligibility. This step is critical, as an improperly drafted trust can inadvertently disqualify a beneficiary from the programs they depend on.
Leigh drafts a trust document tailored to your loved one’s specific circumstances. This includes defining the trustee’s role and authority, permissible distributions, and any special instructions regarding your loved one’s care, preferences, and quality of life.
We walk through the document together so you fully understand how the trust works and what it accomplishes. Once you’re satisfied, we execute the trust with proper signing and notarization.
A trust only works if it’s properly funded. We provide guidance on transferring assets into the trust, coordinating beneficiary designations for life insurance and retirement accounts, and ensuring everything aligns with your overall estate plan.
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I knew from my experience working with attorneys for over 30 years that with a blended family my husband and I needed professional estate planning. Ms. Goodson provided us with excellent options and did a very thorough explanation of the pros and cons of each of them. She offered non-judgmental opinions and legal information about the equitable division of our blended families small estate. We chose to go with the more expensive trust option because it would be a simpler and less expensive probate for our children who almost all live out of state. She and her assistant made extra efforts to accommodate our schedule and the entire process was quickly completed. We highly recommend The Goodson Firm. P.C. for your estate planning and probate legal services.
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