When you care for someone with disabilities, planning for their future brings unique challenges. A special needs trust protects their financial future and keeps them eligible for government benefits like Medicaid or Supplemental Security Income (SSI).
How a special needs trust works
A special needs trust holds and manages assets for a person with disabilities. Instead of giving them money directly, you place the assets in the trust. A trustee manages the funds and uses them to pay for services or goods that public benefits don’t cover, such as personal care, education, transportation, or entertainment.
Since the beneficiary doesn’t own the money in the trust, it doesn’t count against the income or asset limits that programs like Medicaid enforce. Your loved one keeps their public support while still getting extra help from the trust.
Different types of special needs trusts
There are three main kinds of special needs trusts: first-party, third-party, and pooled. A first-party trust holds money that belongs to the person with disabilities, like funds from a lawsuit or inheritance. A third-party trust uses money from someone else, like a parent or grandparent, and is common in estate planning. A pooled trust combines money from several people with disabilities but keeps each person’s account separate.
Each type works a little differently. For instance, when a first-party trust ends, any remaining money must go to the state to repay Medicaid. That rule doesn’t apply to third-party trusts.
Why setting one up makes sense
Government programs like Medicaid limit how much income and savings a person with disabilities can have. If their assets go over the threshold, even just a few thousand dollars, they could lose that support. A special needs trust prevents that and improves their quality of life. It also ensures proper management of the money, especially if the person can’t handle finances alone.
Make thoughtful decisions now
A well-planned special needs trust gives long-term care and protects important benefits. With the right approach, you support your loved one’s needs and gain peace of mind.