When I meet with families about special needs trusts, the question that stops them is rarely about the documents. It is about the person. Who will manage this trust when we are gone? Some families have an obvious answer: a sibling, an aunt, a trusted friend. Many do not. And when families start looking at banks and trust companies, they find high fees and minimum balances that put a corporate trustee out of reach for an ordinary trust.
There is a middle path that most families have never heard of: the independent trustee.
What an independent trustee is
An independent trustee is an individual professional who administers trusts as their occupation. They are not employees of a bank or a trust company. They run their own small practices, which keeps overhead low, and they usually charge either an hourly rate or a yearly fee of around one percent of the trust. Corporate trustees often charge more than that and may decline trusts below a minimum balance entirely.
The lower fee is not the only advantage. An independent trustee has a small client list, so the person who knows your son or daughter is the same person who answers the phone. For a special needs trust, where the trustee’s decisions touch SSI, Medicaid, housing, and daily quality of life, that continuity matters as much as the cost.
Where to find one: a national directory
Until recently, finding an independent trustee meant asking around and hoping. Now there is a national resource. The Independent Trustee Alliance directory lets you search by state and filter for trustees who handle special needs trusts. ITA certified trustees must have years of trustee experience, ongoing continuing education, professional references, and agree to a code of ethics. A listing is not a guarantee, but it is a real starting point that did not exist for earlier generations of families.
A second place to look is the National Guardianship Association’s Find a Guardian directory, which lists individual professional fiduciaries across the country, many of whom also serve as trustees.
We have added a permanent page to our site with both listings and the questions to ask before you hire anyone: Find an Independent Trustee. You will find it in our Resources menu from now on.
How to interview a trustee candidate
Treat this like hiring for the most important job in your child’s future, because it is. Ask what they charge and when. Ask how many special needs trusts they administer and how they stay current on SSI and Medicaid rules. Ask about their succession plan: what happens to your trust if something happens to them? Ask whether they carry errors and omissions insurance. And ask whether a family member can serve alongside them as co-trustee or trust advisor, which lets your family keep a voice while the professional handles the rules.
One note of caution that applies to any directory: a listing is a starting point, not an endorsement, and that includes the directories we link to. Interview more than one candidate, check references, and make sure the fee arrangement is in writing.
You do not have to decide alone
Our mission is to give families free legal educational information so you can make informed decisions, whether you use our low-cost documents, hire your own lawyer, or both. If you want to talk through your trustee decision, the consultation is free. Education is always free. Email tom@specialneedstrustsonline.com or call 508-690-0012.
Ask a room full of parents what stops them from setting up a special needs trust, and eventually someone will say it out loud:
“I’ve heard the state takes it all back when he dies. So what’s the point?”
It is the most common reason families walk away from a trust, and for most of them it is simply not true.
The confusion comes from the fact that there are two different kinds of special needs trust, both are called “special needs trusts,” and only one of them has a Medicaid payback. Which one you are dealing with comes down to a single question.
Whose money is it?
That is the whole test. It does not matter who set the trust up or whose name is on it. What matters is whose money went in.
Third-party trust
First-party trust
Funded with someone else’s money: parents, grandparents, an aunt, a life insurance policy.
Funded with the beneficiary’s own money: a lawsuit settlement, back benefits, an inheritance that landed in their name.
No Medicaid payback. Whatever is left goes wherever you said it should go: siblings, grandchildren, a charity.
Medicaid payback required by federal law. At death, the state is reimbursed first. Anything left over then passes to your heirs.
Can be created at any time, at any age.
Must be established before the beneficiary turns 65.
So here is the answer to the question that stops so many families:
If you are a parent or grandparent planning to leave money to a loved one with a disability, you are creating a third-party trust. There is no Medicaid payback at any point. The money you leave stays in your family.
The payback rule that everyone has heard about is real, but it attaches to the first-party trust, and only because Congress required it in exchange for letting someone shelter their own money and stay on benefits. It is the price of a very good deal, not a punishment. A fuller side-by-side comparison is here →
The mistake that turns one into the other
Now the part that actually costs families money.
A third-party trust only stays a third-party trust if the money goes straight into it and never touches your child’s hands. The moment an inheritance lands in your adult child’s name, even for a day, even by accident, it becomes their money. Their money can only be sheltered in a first-party trust, with the payback.
Here is how that happens in real life, over and over:
A grandparent writes a will leaving “$25,000 to each of my grandchildren,” with the best intentions in the world.
A parent names their adult child as a beneficiary on a life insurance policy or a retirement account, because that is what the form asks for.
A relative dies without a will, and state law hands your child a share automatically.
A well-meaning aunt opens a savings account for your child and puts their name on it.
Any one of these can do two things at once. It can push your child over the $2,000 resource limit and knock them off SSI and Medicaid, and it can convert money that could have passed cleanly to the family into money the state gets reimbursed from.
The fix is simple. Nobody leaves money to your child. Everybody leaves money to the trust, and the trust takes care of your child. The same money serves the same purpose with a completely different outcome.
Three things to do this month
Set up the third-party trust first. It has to exist before anyone can name it. Until it does, every relative’s will is pointed at a target that is not there.
Check your beneficiary designations. Life insurance, 401(k), IRA, pension, savings bonds. These pass outside your will. A perfect will cannot save a retirement account that names your child directly. This is the most commonly missed step in special needs planning, and it takes twenty minutes to fix.
Tell the grandparents. Have the conversation, awkward as it is. Give them the exact language: leave the gift to the trust, not to the child. Most families find that relatives are relieved to be told. They were worried about doing the wrong thing and had no idea what the right thing was.
Watch: Special Needs Trusts & Wills Explained
Attorney Tom Sannicandro walks through how the trust and the will work together, why beneficiary designations matter more than most families realize, and what belongs in each document.
What if the money is already in your child’s name?
It happens, and it is not fatal. A first-party special needs trust can still shelter it and protect their benefits. The payback applies, but the alternative is spending the money down to $2,000 and losing years of Medicaid coverage in the meantime. Sheltering it is almost always the better outcome. First-party trusts for adults with disabilities →
An ABLE account can also hold a modest amount of the beneficiary’s own money. Note that ABLE accounts do carry a Medicaid payback, which is another reason the large, long-term money belongs in a third-party trust and the everyday spending money belongs in ABLE.
What it costs
Attorneys typically charge $3,000 to $5,000 for a special needs trust and a coordinated will. We are a 501(c)(3) nonprofit founded by a disability law attorney who is also the father of an adult son with Down syndrome, and a complete personalized trust and will is $189.99. You answer guided questions in plain English and the documents are emailed to you when you finish.
The Letter of Intent and the HIPAA Release are free to anyone, with no purchase.
This article is general information about how these trusts work, not legal advice about your family’s situation. State Medicaid rules and trust requirements vary. If your situation involves a settlement, an inheritance already received, or a trust that has already been funded, talk with us or with an attorney in your state before you act.
The day your child turns 18, you lose the legal right to talk to their doctor, see their school records, and manage their money. Nobody warns you ahead of time.
There is no letter in the mail and no meeting at the school. One morning your son or daughter turns 18, and the pediatrician’s office that has known your family for eighteen years can no longer legally tell you the results of a blood test. The school that has sat across the table from you at every IEP meeting since kindergarten now answers to your child instead of you. The bank will not talk to you. The insurance company will not talk to you.
This surprises almost every family. It should not have to.
The good news is that every one of these doors can be held open. It just has to be done before the birthday, by signing a handful of documents while everyone has time to do it calmly. Below is exactly what changes at 18, what you can do about it, and the order to do it in.
What actually changes the day your child turns 18
Four things happen at once, automatically, with no paperwork and no warning:
Medical privacy locks you out. Under HIPAA, your adult child’s health information belongs to them. Doctors, therapists, hospitals, and pharmacies can refuse to speak with you, and in an emergency many will.
School records transfer to your child. Under FERPA, the right to see records and consent to services moves from you to the student at 18. If your child is still in high school or in a transition program that runs to age 22, you can be shut out of the IEP process you built.
Financial and legal authority ends. You can no longer sign for them, open accounts for them, apply for benefits on their behalf, or make decisions about their money.
SSI gets re-decided under adult rules. Social Security performs an age-18 redetermination, re-evaluating disability based on ability to work rather than childhood functioning.
There is another side to that last change, and most families have never heard it:
Your income stops counting at 18. While your child is a minor, Social Security counts a parent’s income and resources against the child. That is why so many families are told their child does not qualify for SSI. The counting stops at 18. A child who was denied SSI because you earned too much may now qualify on their own. If you were turned down before, apply again after the birthday.
Qualifying for SSI also usually opens the door to Medicaid, and Medicaid is often the single largest source of lifetime support your child will ever have. The application is worth the effort.
The fork in the road: guardianship or something lighter?
When families learn what happens at 18, the first word they usually hear is guardianship. It is the traditional answer, and for some families it is the right one. It is not the only one, and it is not the default.
Guardianship is a court proceeding. A judge declares your adult child legally incapacitated and transfers their decision-making rights to you. It costs money, takes months, usually requires a current medical or psychological evaluation, and is difficult to undo. It also removes rights, including in many states the right to vote, to marry, and to sign a contract.
For some people, that level of protection is necessary and appropriate. For many others, it is more than the situation calls for. Courts across the country now ask a harder question first: what is the least restrictive arrangement that actually keeps this person safe?
The lighter alternatives:
Supported Decision-Making: your child keeps their legal rights and formally names people they trust to help them understand choices and consequences. It is the fastest-growing alternative in the country.
Power of Attorney: your child voluntarily gives you authority over financial and legal matters. It requires that they understand what they are signing, which is a lower bar than most people assume.
Representative Payee: lets you manage their SSI or SSDI payments without any court involvement at all.
The important thing is this: the alternatives are only available while your child can still sign. Once you go to court, that option is largely gone. It is worth doing the lighter documents first and reserving guardianship for the situations that truly require it.
The 7 documents to have before the birthday
1. HIPAA Release (free)
The most valuable piece of paper for the least effort. One page, signed by your child, and doctors can talk to you again. If you do nothing else on this list, do this one. Get the free HIPAA release →
2. Health Care Proxy / Advance Directive
The HIPAA release lets you hear what is happening. The health care proxy lets you decide. If your child cannot make or communicate a medical decision, this document names you. Requirements vary by state, so use a form built for yours. State-specific healthcare directives →
3. Power of Attorney
Covers money, benefits applications, contracts, housing, and the hundred administrative things that come up. Power of Attorney →
4. Power of Attorney for Education
The one families forget until they are locked out of an IEP meeting. If your child is still in school or heading into a transition program, this keeps you at the table. Power of Attorney for Education →
5. Supported Decision-Making Agreement
Formalizes who helps your child think through decisions, without taking away their right to make them. Increasingly recognized by schools, doctors, and banks. Supported Decision-Making →
6. Special Needs Trust (and your own Will)
Here is the trap: your adult child can lose SSI and Medicaid by owning more than $2,000. A well-meaning inheritance from a grandparent, a life insurance payout, or a bequest in your own will can disqualify them from the benefits they depend on.
A third-party special needs trust holds those assets for your child without the assets counting as your child’s. The money can still be spent on their life, including education, therapy, a vehicle, technology, travel, and recreation, but eligibility stays intact. Your will has to be written to point into the trust, which is why the two documents belong together.
It is not a legal document, but it may be the most important one anyway. This is where you write down everything the legal papers cannot hold: the morning routine, what calms them down, the foods they hate, the cousin they adore, what a good day looks like. Someday someone who is not you will be reading it. Get the free Letter of Intent →
Watch: Turning 18 and 22, the legal and financial changes explained
Attorney Tom Sannicandro walks through what changes at each milestone, the benefit rules that trip families up, and how the documents above fit together.
Decide the big question: guardianship, or a less restrictive path? Talk to your child’s doctors and teachers. Book a free planning session if you are unsure.
6 months before
If you are pursuing guardianship, start now. Evaluations and court schedules make this slower than anyone expects.
3 months before
Sign the HIPAA release, health care proxy, powers of attorney, and any supported decision-making agreement. Give copies to every doctor and to the school.
The birthday month
Apply, or re-apply, for SSI under adult rules. Apply to be representative payee. Register to vote. If your child is male, confirm Selective Service registration, since it affects future federal aid.
Within the first year
Put the special needs trust in place, update your own will to fund it, open an ABLE account, and write the Letter of Intent.
One more thing worth knowing about ABLE accounts
As of January 1, 2026, ABLE accounts opened up dramatically. Eligibility now extends to anyone whose disability began before age 46, up from 26. Millions of people, including a large number of veterans, became eligible this year and do not know it.
An ABLE account and a special needs trust are not competitors. The account is for everyday spending your child controls, with a debit card and a yearly contribution cap. The trust is for the large, long-term money, such as an inheritance, a home, or life insurance, and has no cap at all. The strongest plans use both. More on ABLE accounts →
What this usually costs, and what it costs here
The reason so many families arrive at the eighteenth birthday with nothing signed is not that they did not care. A law firm quoted them $3,000 to $5,000 and they put it off for a year, and then another year.
We are a 501(c)(3) nonprofit founded by a disability law attorney who is also the father of an adult son with Down syndrome. A complete personalized special needs trust and will is $189.99. The HIPAA release and the Letter of Intent are free to anyone, with no purchase. Documents are emailed to you as soon as you finish the questions. That price is possible because the nonprofit was created for exactly this purpose.
Start with the free one
If the birthday is coming and you are not sure where to begin, begin with the HIPAA release. It takes a few minutes, it costs nothing, and it is the document families tell us they wished they had the first time they stood in an emergency room and were told they were not allowed to know anything.
This article is general information about how the law works at age 18, not legal advice about your family’s situation. Rules for guardianship, powers of attorney, and healthcare directives vary by state. If your situation is complicated, or if you are weighing guardianship, talk with us or with an attorney in your state before you sign anything.
As we approach the time of year when we move our clocks forward, it’s important to remember that this is also an excellent opportunity to revisit your estate planning documents, including your special needs trust. Updating your special needs trust when the clocks go ahead can help ensure that your loved one with special needs continues to receive the support they need, even after you’re gone. In this blog post, we’ll explore why updating your special needs trust when the clocks go ahead is a smart move.
What Is A Special Needs Trust?
Before we delve into why it’s important to update your special needs trust, let’s first understand what it is. A special needs trust is a legal document that allows you to set aside money and assets for the benefit of a person with special needs. These trusts are designed to help individuals with disabilities maintain eligibility for government benefits while still receiving the additional support they need.
Changes in Laws & Regulations - Update your Special Needs Trust
Laws and regulations regarding government benefits and special needs trusts can change over time. Updating your special needs trust when the clocks go ahead can ensure that it is in compliance with any new laws or regulations that may have been enacted since you last updated it. This will help ensure that your loved one with special needs continues to receive the support they need without any interruptions.
Changes In Your Personal Situation
Your personal situation may change over time, and your special needs trust should reflect those changes. For example, you may have acquired new assets or received an inheritance that you would like to include in the trust. Or, you may have had another child who you want to include in the trust. Updating your special needs trust when the clocks go ahead can help ensure that it reflects your current situation and that it continues to meet the needs of your loved one with special needs.
Changes In Your Your Loved One's Needs
Finally, your loved one’s needs may change over time. Perhaps they require additional medical care or have developed a new interest that requires additional funding. Updating your special needs trust when the clocks go ahead can help ensure that it continues to meet the evolving needs of your loved one with special needs.
Conclusion - The Importance Of Updating Your Special Needs Trust
Updating your special needs trust when the clocks spring forward is not just a prudent action; it’s a proactive measure that can safeguard the ongoing support and well-being of your loved one with special needs, long into the future. As time progresses, various factors such as shifts in laws and regulations, alterations in your personal circumstances, and changes in your loved one’s needs can all impact the efficacy and relevance of your special needs trust. Therefore, it’s imperative to conduct regular reviews and updates to ensure that the trust aligns with your current situation and your loved one’s evolving requirements.
If you haven’t revisited your special needs trust in some time, the onset of daylight saving time presents an opportune moment to do so. By taking the initiative to review and potentially revise your trust document now, you can proactively address any outdated provisions, anticipate future challenges, and make necessary adjustments to enhance its effectiveness. Don’t underestimate the importance of this task; by staying proactive and vigilant, you can ensure that your loved one receives the comprehensive support and protection they deserve, both now and in the years to come.
First Party Special Needs Trust Vs Third Party Special Needs Trust
Special Needs Trusts (SNTs) are an important tool for individuals with disabilities to ensure their financial security. There are two types of SNTs, commonly designated as first-party and third-party SNTs. It is important to determine which type of SNT you have or need, as this depends upon whose property is funding the trust.
If the property funding the SNT originates with the SNT beneficiary, then it must be drafted as a first-party SNT
This type of trust is often used when the beneficiary has received a settlement from a lawsuit or inheritance from a family member. On the other hand, if the property funding the SNT always belonged to someone other than the SNT beneficiary, then it must be drafted as a third-party SNT. This type of trust is typically used when someone other than the beneficiary wants to provide funds for their care and support without affecting their eligibility for government benefits such as Medicaid or Supplemental Security Income (SSI).
First Party Special Needs Trust
A first-party special needs trust is a type of trust that is designed to provide financial support for individuals with disabilities without affecting their eligibility for government benefits. This type of trust is typically funded with the disabled individual’s own assets, such as an inheritance or settlement from a lawsuit. The funds in the trust are used to pay for items and services that are not covered by government programs, such as medical care, housing, transportation, education, recreation and other expenses related to the beneficiary’s disability.
First-party special needs trusts can be useful in many situations. For example, if a disabled individual receives an inheritance or settlement but does not have enough income to cover all of his or her living expenses, a first-party special needs trust can be used to supplement the individual’s income while still allowing him or her to remain eligible for government benefits. Additionally, these trusts can help protect assets from being depleted due to medical costs and other expenses associated with the disability. Finally, they can also provide peace of mind knowing that there will be funds available should something happen to the disabled individual’s primary caregiver.
Frequently Asked Questions About First Party Special Needs Trust Vs Third Party Special Needs Trust
The key distinction lies in who funds the trust. A First-Party Special Needs Trust is funded with the disabled individual’s own assets, while a Third-Party Special Needs Trust is funded by assets belonging to someone other than the beneficiary, such as a parent or grandparent.
Generally, to establish a First-Party Special Needs Trust, the individual with a disability must be under the age of 65 and must meet the Social Security Administration’s definition of disability.
Medicaid typically imposes a payback requirement for funds remaining in a First-Party Special Needs Trust upon the beneficiary’s death, while assets in a Third-Party Special Needs Trust may be distributed to other beneficiaries or charities without a payback to Medicaid.
No, a First-Party Special Needs Trust must be established by a parent, grandparent, legal guardian, or the court. It cannot be established by the individual with a disability.
Funds from a Third-Party Special Needs Trust can be used to supplement the beneficiary’s government benefits, pay for medical and dental expenses not covered by insurance, provide for recreational activities, and enhance their quality of life without jeopardizing their eligibility for public assistance programs.
What to Do After Signing a Will and Special Needs Trust
What to Do After You Have Signed Your Will and Special Needs Trust
Congratulations on taking a major step toward protecting your family's future. Here is everything you need to do next.
Posted December 30, 2022 · By Tom Sannicandro
What To Do After You Have Signed Your Will And Special Needs Trust
Congratulations! You have taken a big step in protecting your family's future! Your wills and special needs trust will insure your loved one with a disability will be able to collect government benefits, i.e. Supplemental Security Income, Medicaid, SNAP, etc, and still have the benefit of their share of your estate, stocks, real estate holdings, 401K account, other retirement accounts, and any life insurance policy benefits.
The Steps Of What To Do After You Have Signed Your Will And Special Needs Trust
1
What To Do After Creating Your Special Needs Trust
Store your Wills and Trust safely.
Keep your original Wills and Special Needs Trust in a secure place in your home where you store important documents. An unlocked fireproof file is ideal — unlocked because your Personal Representative (Executor) must be able to access them to deliver to your lawyer or file with the court.
(You can get one by clicking here.)
Inform key people where they are.
Let your Personal Representative (Executor) and the Trustee of the Special Needs Trust know where the documents are stored and how they can access them.
Provide copies.
Give both your Personal Representative (Executor) and the Trustee of the Special Needs Trust a copy of your Will and Special Needs Trust — either in paper or electronic form.
Update your beneficiaries.
Change the beneficiaries of your retirement accounts, life insurance policies, or other brokerage accounts intended for your child with a disability to the Special Needs Trust.
Inform family members about the Trust.
Let relatives — especially grandparents, aunts, and uncles — know that you have established a Special Needs Trust for your child.
This is important to prevent them from accidentally leaving money directly to your child in their Will.
Instead, they should direct gifts or inheritances to the Trustee under "The [Your Child's Name] Trust for the benefit of [Your Child's Name]."
💡 If Grandma, Grandpa, or anyone else wants to make a gift during their lifetime:
Tell them not to give money or assets directly to your child. Any gift should go to the Special Needs Trust, so it does not affect your child's SSI or Medicaid eligibility.
For smaller gifts (under the annual gift limit), they might also consider contributing to your child's ABLE Account if one has been established.
Decide whether to fund the Trust now or later.
Most people do not fund the Special Needs Trust immediately — instead, it is typically funded after your death using the assets you've designated in your Will or beneficiary designations (such as life insurance or retirement accounts).
Do not use your child's own funds.
Never fund this trust with money or property that already belongs to your child with a disability. Those assets must go into a First-Party Special Needs Trust. (For more information, click here.)
Consider creating an ABLE Account.
Depending on the amount of assets, an ABLE Account can be a helpful, flexible supplement to a Special Needs Trust.
Opening a bank account for the Trust.
If you are funding the trust now, you will need a Tax ID Number (EIN) from the IRS. You can apply for one online
(click here to go to the IRS website),
or we can assist you with this process for a modest fee. Detailed instructions (click here)
Once you have the EIN and a copy of the trust, bring both to your bank to open the account.
Have questions? We're here to help.
If you have any questions about any of these steps, please contact us.
Need Information About Special Needs Trusts?
Our team is here to guide you every step of the way — with plain-English explanations, no legal jargon, and affordable expert support built for families like yours.
The major difference is that SSI determination is based on age/disability and limited income and resources, whereas SSDI determination is based on disability and work credits.
In addition, in most states, an SSI recipient will automatically qualify for health care coverage through Medicaid. A person with SSDI will automatically qualify for Medicare after 24 months of receiving disability payments (individuals with amyotrophic lateral sclerosis [ALS] are eligible for Medicare immediately).
What Is the difference between SSI and SSDI?
The major difference is that SSI determination is based on age/disability and limited income and resources, whereas SSDI determination is based on disability and work credits.
In addition, in most states, an SSI recipient will automatically qualify for health care coverage through Medicaid. A person with SSDI will automatically qualify for Medicare after 24 months of receiving disability payments (individuals with amyotrophic lateral sclerosis [ALS] are eligible for Medicare immediately).
How does Social Security define disability?
Social Security uses a strict definition of disability that relates to your ability to perform work and the projected length of your disability. It requires that you submit medical records to support your application. If you have a short-term or partial disability, you are not eligible for SSI or SSDI.
How do I apply for SSI or SSDI?
You can apply for SSI online only if you are an adult with a disability. SSI applications are not available online for people applying for a child under age 18 with a disability or a non-disabled senior aged 65+. These individuals must visit their local Social Security office or call 1-800-772-1213 (TTY 1-800-325-0778) between 7 a.m. – 7 p.m., Monday through Friday.
You can apply for SSDI benefits online at any age. You also can apply by calling Social Security at the number above or at your local office.
How do I apply for SSI or SSDI?
The Supplemental Security Income (SSI) program provides monthly payments to adults and children with a disability or blindness who have income and resources below specific financial limits. SSI payments are also made to people age 65 and older without disabilities who meet the financial qualifications.
You may be eligible to receive SSI monthly payments even if you are already receiving Social Security Disability Insurance or retirement benefits.
SSI is a Federal program funded by general tax revenues (not Social Security taxes). It provides monthly payments to meet basic needs for food, clothing, and shelter. The base monthly federal amount varies depending on your living arrangement and countable income.
Not everyone gets the same amount. You may get more if you live in a state that adds money to the federal SSI payment. You may get less if you have other income such as wages, pensions, or Social Security benefits. You may also get less if someone pays your household expenses or if you live with a spouse and he or she has income.
You may be able to get SSI if your resources are worth $2,000 or less. A couple may be able to get SSI if they have resources worth $3,000 or less.
Anyone may apply for SSI. The SSI program provides monthly payments to people who:
Are at least age 65 or blind or disabled.
Have limited income (wages, pensions, etc.).
Have limited resources (the things you own).
Are U.S. citizens, nationals of the U.S., or some noncitizens.
Reside in one of the 50 states, the District of Columbia, or the Northern Mariana Islands. Exception: The children of military parent(s) assigned to permanent duty outside the U.S. and certain students temporarily abroad may receive SSI payments outside the U.S.
Anyone who believes they meet Federal Disability requirements is eligible to apply. Your family members may also receive benefits if you can no longer work due to a medical condition.
You are considered disabled under Social Security rules if:
You cannot work due to a medical condition;
You cannot do work that you did before;
We decide that you cannot adjust to other work because of your medical condition(s); and
Your disability has lasted or is expected to last for at least one year or to result in death.
People who have worked long enough may also be able to receive Social Security Disability Insurance benefits as well as Supplemental Security Income (SSI) benefits.
Have You Wondered When Is A Special Needs Trust Needed?
A special needs trust is needed if your child with a disability is expected to be able to collect Supplemental Security Income, SSI, or some other government benefits, which could include Medicaid, SNAP, or housing benefits, when they become an adult. This would be because your child is unlikely to be able to support themselves by working independently. If you think this is a possibility, and you have assets you would like to leave your child when you die, you should have a Special Needs Trust.
What Is A Special Needs trust?
A special needs trust, also known as a “supplemental needs trust”, is an estate planning tool that enables a person with a disability or functional needs to receive financial support without negatively affecting any means-tested government benefits they’re receiving like Medicaid or Supplemental Security Income (SSI).
Because needs-based government benefits have income and asset limits, receiving financial gifts or assets could reduce or eliminate eligibility.
This means if you have an adult daughter with autism on SSI benefits and want to give her money to meet her living expenses, she could be disqualified from receiving needs-based government benefits. Likewise, if you die and leave her your Roth IRA worth hundreds of thousands of dollars or any amount that exceeds the asset limit, she could no longer receive SSI or Medicaid.
But if you put the assets into a special needs trust for your daughter, she can keep her benefits and receive your financial support for the rest of her life.
What can a special needs trust pay for? Money in a special needs trust is meant to be a supplemental resource, meaning it should cover expenses that aren’t already covered by government benefits. More specifically, the beneficiary should use the money for expenses other than food and shelter. You must ensure money is spent in accordance with IRS guidelines, so hold on to receipts or make a spreadsheet to keep track.
Benefits of a special needs trust
Setting up a special needs trust for someone can help you enhance their quality of life and give you peace of mind. These trusts ensure that a person with functional needs will receive the financial support they need throughout their lifetime, whether you’re here or not.
Here are a few key benefits of special needs trusts:
Your loved one can still receive needs-based government benefits.
In some situations, creditors or lawsuit winners can’t access the funds or assets in the trust.
Trust funds can be invested by a trustee or financial advisor.
You may be able to have control over who inherits the trust when the beneficiary dies.
Trusts provide protection against financial abuse, as trustees have a fiduciary duty to act in the beneficiary’s best interest.
If you have a child or other loved one with special needs, you may want to establish a special needs trust. A special needs trust is an estate planning tool that can help you provide for the needs of an individual who is disabled without jeopardizing his or her eligibility for government benefits. A qualified attorney can help you establish and administer this type of trust.
Reasons To Establish A Special Needs Trust
Unlike other types of trusts often used in estate planning, the primary goal of a special needs trust is to provide for the needs of an individual who is disabled throughout his or her life.
Federal and state benefits are generally available to qualifying children and adults who have special needs. If your child qualifies for government benefits, one of your goals may be to help make sure that his or her eligibility continues into the future. A special needs trust can help you attain this goal. In addition, this type of trust can provide for supplementary care and services for your loved one.
To preserve eligibility for Medicaid
Medicaid, a joint federal-state program, provides medical assistance to those who are disabled and can demonstrate financial need. Children and adults can qualify for Medicaid only if their monthly income and the value of their other assets fall below certain limits, which vary from state to state. Most states set a $2,000 asset limit.
In determining eligibility for Medicaid, a state may count only the income and assets that are legally available to the applicant. A special needs trust restricts the beneficiary’s own direct access to the assets in the trust to such an extent that the assets are not considered legally available to the beneficiary. Thus, a special needs trust can protect Medicaid eligibility because assets in the trust are uncountable.
To preserve eligibility for Supplemental Security Income (SSI)
Children and adults with special needs who have limited income and resources often receive monthly benefits from Supplemental Security Income (SSI). These cash benefits can be used for basic needs such as housing and food. But because SSI benefits are need-based, inheriting money can mean that a child with special needs will lose eligibility for this benefit program. By naming a special needs trust as your beneficiary instead of your child, however, assets can be devoted to the care of your loved one. In addition, since SSI recipients are normally automatically eligible for Medicaid benefits, preserving your child’s eligibility for SSI may preserve their eligibility for Medicaid as well.
To provide additional care and services
A special needs trust can be especially useful if you want to provide care and services necessary for your child’s well-being, without supplanting Medicaid benefits.
Although Medicaid pays for a number of medical costs, including hospital bills, physician services, and long-term care, it will not subsidize items and services considered nonessential. These may include health-related expenses such as eyeglasses, dental care, rehabilitation services, and home health aide services, as well as personal expenses such as transportation, computer equipment, and vacations.
To help confirm that trust assets are not considered legally available to the beneficiary, the trustee must have sole discretion over the distribution of trust income and principal. The beneficiary must have no control over the trust and no right to demand distributions from the trust. The trustee should purchase goods and services directly on the beneficiary’s behalf, instead of giving the beneficiary money from the trust to purchase items needed.
What requirements must a special needs trust meet?
If the trust is intended to supplement, rather than replace, government benefits, it must be properly drafted. Although requirements vary according to state law and the type of special needs trust established, here are some of the rules that apply to special needs trusts in general:
Generally, only a parent, grandparent, legal guardian, or court can set up a special needs trust. The person with disabilities, no matter how competent, cannot be the “creator” of the trust (even if the trust is funded by their personal assets).
Funds in the special needs trust may not be available to the beneficiary.
The beneficiary cannot revoke the trust.
The individual with special needs must be considered “permanently and totally disabled” under SSI criteria. Different rules apply to adults and children.
Under the terms of the trust, the trustee may not be permitted to make payments or distributions that might interfere with government benefit eligibility. Distributions cannot be made directly to the beneficiary.
Special needs trusts may be established as part of a will or during the creator’s lifetime.
Special needs trusts can hold an unlimited amount of funds and funds can be added at any time.
What types of special needs trusts are available?
Although there are many types of special needs trusts, they fall into two general categories: the third-party special needs trust, which is funded with assets belonging to someone other than the beneficiary; and the self-settled trust, which is funded with assets belonging to the beneficiary.
How is a special needs trust typically funded?
In many cases, a special needs trust is established, but not funded, while the parent or other creator is alive. Upon the parent’s death, their will transfers the child’s portion of an inheritance to the special needs trust. The trust (instead of the child) can also be designated as the beneficiary of various assets, such as employee benefits and life insurance policies.
Typically, a special needs trust is funded using:
Life insurance
Cash (including gifts from relatives)
Investments (e.g., stocks, bonds)
Retirement plan benefits (e.g., pension benefits, IRA funds, 401[k] assets)
Personal and real property
Proceeds from a personal injury settlement (applies to self-settled trusts)
What else should you consider for a special needs trust?
Selecting a trustee
A trustee is a person or institution selected to administer a trust and manage its assets. The trustee’s role is to adhere to the terms of the trust document and fulfill its objectives. You may wish to name yourself or another family member as trustee of the special needs trust, or you may wish to name a professional trustee. Another option is to name a family member and a professional trustee as co-trustees.
Providing a letter of intent
If you set up a special needs trust through your will, you might also want to draft a letter of intent to describe how you want your child to be cared for after you’re gone.
Although it’s not a legal document, it can provide important information to guardians, trustees, family members, and others involved in the care of your child. The letter may address such issues as your child’s medical needs, daily routine, interests, likes and dislikes, religious practices, living arrangements, social activities, behavior management, and degree of self-sufficiency. Such a letter can prove invaluable to your child’s caregivers and can also make the transition to a new living situation as smooth as possible for your child.
Informing family members
Explain to siblings or other family members why you’re setting up the special needs trust. Although siblings might expect to receive equal inheritances, more resources will probably need to be set aside for the benefit of your child with special needs. Explanations and clear directions now may help avoid family conflicts later.
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