Planning for a family member with a disability comes with a unique set of challenges. You want to provide for them financially, but at the same time, you don’t want to accidentally put their government benefits—like Medicaid or Supplemental Security Income (SSI)—at risk. That’s where Special Needs Trusts (SNTs) come in. These trusts help protect your loved one’s future while ensuring they continue to receive the benefits they depend on.
What Is a Special Needs Trust?
A Special Needs Trust (SNT) is a legal way to set aside money for someone with a disability without affecting their eligibility for crucial government assistance programs. Since Medicaid and SSI have strict income and asset limits, receiving a financial gift or inheritance directly could cause your loved one to lose their benefits. But an SNT holds the money in a way that doesn’t count against them, allowing them to keep the assistance they need.
Types of Special Needs Trusts
There are two main types of Special Needs Trusts, and the right one depends on where the money is coming from:
- First-Party Special Needs Trust
- Funded with the disabled individual’s own money (e.g., an inheritance, personal injury settlement, or savings).
- Must include a Medicaid payback provision, meaning that when the individual passes away, any leftover funds must first be used to repay Medicaid for services provided during their lifetime.
- Third-Party Special Needs Trust
- Funded with money from someone else (e.g., parents, grandparents, or other family members).
- Does not require a Medicaid payback, so any remaining funds can go to other beneficiaries after the individual’s passing.
Keeping Government Benefits Intact
Government programs like Medicaid and SSI have strict financial rules. If a disabled individual suddenly inherits money or receives a large financial gift outright, they could lose these benefits. But by placing assets in a Special Needs Trust, families can:
✅ Keep Medicaid coverage, which helps pay for medical and long-term care.
✅ Maintain SSI eligibility, which provides cash assistance for basic living expenses.