Special Needs Trust Guide

A Special Needs Trust (SNT) holds assets for a person with disabilities without disqualifying them from SSI or Medicaid. Properly structured, an SNT can pay for supplemental needs — technology, education, recreation, transportation — while preserving critical benefits. The wrong type can trigger benefit loss.

First-Party SNT (d4A)

→Funded with the disabled person's own assets (lawsuit settlement, inheritance received directly, personal savings)
→Must be created before age 65
→Medicaid payback required at death — state gets reimbursed for Medicaid benefits paid
→Can be self-settled (person with disability can be beneficiary and contributor)
→Requires court or parent/guardian/attorney to establish

Third-Party SNT

→Funded by parents, grandparents, other family members — NOT the disabled person's own funds
→No age limit for creation or funding
→NO Medicaid payback — remaining assets pass to other named beneficiaries
→Ideal for estate planning by parents/grandparents
→Can be set up by parents via a will (testamentary) or now (living trust)
What Can the Trust Pay For?
Allowed (supplemental needs):
• Assistive technology
• Transportation
• Education & tutoring
• Recreation & vacations
• Computer/phone/electronics
• Clothing beyond basic
• Personal care services
• Dental work beyond Medicaid
• Legal fees
NOT allowed (may reduce SSI):
• Cash distributions to beneficiary
• Food and shelter costs (ISM rules)
• Anything that substitutes for Medicaid
• Gifts or cash equivalents
• Paying bills that convert to SSI income
Find Your Trust Type

SNTs must be drafted by an attorney experienced in disability law — a standard will or trust won't work. Setup costs range from $2,000–$5,000 for a simple trust. Pooled trusts (managed by nonprofit organizations) are a lower-cost alternative — fees of 0.5–2% annually, no attorney needed to create. Find a special needs attorney at specialneedsalliance.org.