Special Needs Trusts

A Special Needs Trust (SNT) is a powerful estate planning tool designed to protect the long-term well-being of individuals with disabilities while preserving their eligibility for government benefits such as Medicaid and Supplemental Security Income (SSI). These trusts serve two essential purposes:

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1. Preserving Public Benefits: Many government benefit programs are means-tested, meaning eligibility is based on the beneficiary's income and assets. Without proper planning, an inheritance or financial gift can disqualify someone from receiving these crucial benefits. A special needs trust allows you to leave assets for a loved one without affecting their eligibility.
    

2. Protecting Vulnerable Beneficiaries: Similar to a spendthrift trust, a special needs trust also protects assets from being misused or wasted. This is particularly helpful when the beneficiary may lack the judgment or ability to manage money due to age, disability, or personal challenges such as substance abuse or mental health issues.

Who Needs a Special Needs Trust?

Special needs trusts are appropriate for individuals of any age whose physical, mental, or cognitive disability prevents them from earning a living or managing money independently. They are also commonly used when:

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• A beneficiary is under age 30 and lacks financial experience
   

• There is a history of substance abuse, emotional instability, or poor financial judgment
   

• You want to ensure long-term oversight of how funds are used for your loved one’s benefit

First-Party vs. Third-Party Special Needs Trusts

There are two main types of special needs trusts:

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• First-Party Special Needs Trust: Funded with the beneficiary’s own assets, such as a personal injury settlement or inheritance received outright. These trusts must meet specific federal and state requirements and typically include a Medicaid payback provision upon the beneficiary’s death.
   

• Third-Party Special Needs Trust: Funded with assets from someone other than the beneficiary—such as a parent, grandparent, or legal guardian—often through an estate plan, life insurance policy, or outright gift. These trusts do not require Medicaid payback, making them more flexible in long-term planning.