What is a special needs trust? This is a common type of trust with a very important purpose, and it’s one that you’ll want to understand fully if you have a loved one who would benefit from this level of support.

Below, we’ll discuss in further detail what special needs trusts are, how they’re different from other types of trusts, as well as the purpose and benefits of setting one up.

What is a Special Needs Trust?

A special needs trust (sometimes referred to as a supplemental needs trust) is a legal arrangement outlined in a will that provides designated money or property to a loved one with a disability. It also designates a trustee, which is a person or entity who is responsible for overseeing the care of the recipient of the trust and managing their assets.

The biggest benefit of a special needs trust is that it provides supplemental support without interfering with an individual’s eligibility for public assistance programs like Supplemental Security Income (SSI), Medicaid, or Medicare—all of which have strict income requirements. Instead, an individual who is chronically ill or physically or mentally disabled can redeem both the benefits of the public assistance programs and the assets of the trust, which can make a big difference in their overall quality of life.

Understanding the Purpose of Special Needs Trust Provisions

There are three primary functions of a special needs trust:

  • To supply a disabled individual with property and/or supplemental income
  • To provide financial support without disqualifying a disabled individual from public assistance programs
  • To assign a person or entity to serve as trustee and oversee management and distribution of trust assets

This legal arrangement benefits the person who establishes the trust as well, ensuring that their loved one will be cared and provided for even when they are not able to take a direct role. In this way, a special needs trust is one of the most beneficial trust arrangements for people with disabilities and their families, and can help provide for additional life-enhancing services, including therapies, medical assistance devices, care facilities, transportation costs, and anything else needed to sustain an individual’s standard of living.

How Does a Special Needs Trust Work?

A special needs trust is set up during the will establishment process with the help of a specialized attorney. During this process, the party creating the trust will work with their attorney to determine how much supplemental income is needed and how much they can provide. Ideally, this will be enough to cover any care and living expenses that are not already covered by public assistance programs, though there are certain limitations to what the funds can be used for, the specifics of which an attorney will help parties navigate.

Should you not wish to employ the services of a lawyer, an option to set up a stand-alone special needs trust is also available. There are many online resources that will assist you in creating a special needs trust document and including all the relevant information necessary. However, families or individuals seeking specialized, tailored trust services should always rely on a lawyer for assistance.

In laying out the terms of the trust, the establishing party will also designate a trustee. This person or entity will play a crucial role in trust oversight and disbursement, as well as care decisions.

Notably, this type of trust doesn’t just ensure a disabled individual’s care for the long-term—it also helps protect their assets from creditors or legal challenges. Any funds disbursed through the trust are not liable for seizure, just as they do not count toward income caps for Medicare, SSI, and other federal programs.

Set Up a Special Needs Trust for a Dependent Loved One

Our team at Walser & Herman has more than thirty years of experience helping families set up supplemental needs trusts, and can help you take action to protect your loved one both now and in the years to come.

Please contact us today to learn more about our trust services and make sure that discretionary funds are set aside and available for your family member’s care.