What Is a Special Needs Trust?
A special needs trust, also called a supplemental needs trust, is a legal tool that protects eligibility for SSI and Medicaid while improving the beneficiary’s quality of life. Instead of giving money or property directly to a person with a disability, the trust holds those assets and a trustee manages them. This structure keeps the beneficiary within the strict financial limits required for means tested programs.
Why a Special Needs Trust Matters
SSI and Medicaid use strict income and resource rules. If a person receives an inheritance or a settlement in their own name, they can lose vital health coverage and monthly support. A special needs trust prevents that outcome because the beneficiary does not control the assets. The trustee makes decisions about when and how to use the funds, and the trust document limits spending to supplemental needs. This separation keeps public benefits intact.
The trust can pay for items that improve daily life, such as education, therapies, transportation, technology, and recreation. These expenses fall outside the scope of government programs, which is why the trust adds real value. With careful planning, a family can give meaningful support without jeopardizing essential benefits. You can review SSI rules at the Social Security Administration and Medicaid guidelines at the Medicaid Eligibility Center.
Key Features of a Special Needs Trust
Every special needs trust uses the same basic structure. The grantor creates and funds the trust. The trustee manages the assets. The beneficiary receives support that does not affect public benefits. The trust document explains how funds should be used and confirms that payments are discretionary. This language is important because mandatory distributions can disqualify the beneficiary from SSI or Medicaid.
- Grantor: The person who creates and funds the trust.
- Trustee: The person or entity responsible for managing investments and making distributions.
- Beneficiary: The individual with a disability who receives support.
- Supplemental purpose: Spending is limited to items that improve quality of life but are not covered by public programs.
For certain situations, other planning tools can work with the trust. Families often use ABLE accounts as a companion resource. You can learn more at the ABLE National Resource Center.
How a Special Needs Trust Protects Benefits
A special needs trust keeps assets out of the beneficiary’s name. That single step makes a major difference. SSI and Medicaid review income and resources regularly. If assets appear in the beneficiary’s control, benefits can stop. A properly drafted trust avoids that problem because the trustee controls distributions and the beneficiary cannot demand payments. This structure maintains compliance with state and federal rules.
The supplemental purpose clause also carries weight. It explains that the trust supports needs that fall outside the basic level of support provided by SSI and Medicaid. This approach protects program eligibility while allowing the beneficiary access to a higher standard of living.
Why Legal Help Matters
Special needs planning requires precise language and careful administration. A small mistake can put benefits at risk. Working with an experienced estate planning attorney prevents errors, ensures compliance with current regulations, and helps families plan for long term needs. For a clear overview of federal guidance, review the SSA’s trust policies at the SSA POMS Special Needs Trust Section.
Contact Metropolitan Law Group
A special needs trust gives your loved one financial support without sacrificing essential benefits. If you want guidance tailored to Arizona, Minnesota, or Wisconsin, contact Metropolitan Law Group. Call 480-409-8200 in Arizona or 612-524-9414 in Minnesota and Wisconsin. You can also book a complimentary 15 minute Discovery Call with our experienced staff today.
