Protecting a loved one living with a disability with a Special Needs Trust

Quick answer: A Special Needs Trust is important to consider if you have a loved one living with special needs who is eligible for means-tested public benefits such as SSI and Medicaid.

According to the U.S. Census Bureau, nearly one in five Americans are living with a disability and about one-half of these individuals are living with a severe disability. Severe disabilities may create a significant financial burden due to curtailed earning power and ongoing expenses.

How does a special needs trust work?

The main purpose of a Special Needs Trust is to help the person living with a disability meet their needs while maintaining eligibility for state and federal public benefits. Distributions from the trust can be used to pay for supplemental services and items not provided by public benefit programs.

Establishing the trust

An attorney who has an understanding of estate planning and special needs trusts can draft the trust. A special needs trust is most often funded with proceeds from a personal injury settlement or judgment, an individual’s personal funds, or from gifts made by family or friends.

Each special needs trust requires a trustee who is responsible for making sure the terms of the trust are followed.

Selecting a trustee

When selecting a trustee, it’s important to consider their experience. Does the trustee have the knowledge necessary to administer the trust effectively and efficiently including an understanding of public benefits rules?

Paying supplemental expenses

Once the Special Needs Trust is established and funded, it may be used for supplemental items that enhance the quality of life for the person living with a disability. Appropriate purchases may include an accessible vehicle, customized wheelchair, computer, gym membership, therapy animal, music or art therapy sessions, or supplemental caregiving services.

How funds in a Special Needs Trust may be used

When funds are placed in the trust — and the person living with a disability is named as the beneficiary — distributions can be made to provide for supplemental needs that can enhance their quality of life.

Examples of allowable purchases may include:

  • An accessible vehicle customized for the needs of the beneficiary
  • A service animal
  • Medications, medical equipment, and therapies not provided by the public benefit programs
  • Educational, recreational, and vocational programs
  • A vacation or travel for medical purposes
  • Entertainment and activities such as music or art classes, gym memberships, specialized camps, sporting events, and concerts
  • Assistive technologies