Special Needs Trusts

Offices in Fishers and Rockville, serving all surrounding Cities

Placeholder

Summary

Sometimes, estate planning involves protecting our beneficiaries either from themselves, future creditors or protecting them so that they do not lose any government benefits that they would be receiving at the time they would inherit. An effective way to offer this protection is through a special needs trust.

There are two types of Special Needs Trusts. The first is a “Self-settled” or a “First Party Special Needs Trust.” This type of trust is funded with the beneficiary’s (the person who has the special need) own money. A good example of this is where a beneficiary has been involved in a lawsuit and is now coming into a large court settlement amount. In this case, it is the money of the Special Needs Beneficiary and that money is used to create the trust. These types of trusts are created by a parent, guardian, grandparent or the court. Recently, the Supreme Court has allowed the person, him/herself, to create a First Party SNT for themselves if they are competent to do so.

A third party SNT is created using the funds of others to create a trust on their behalf. An example of this is when a parent creates a trust in their will or trust as a special needs trust. This type of trust will hold the money that the special needs person would have received as part of an inheritance from their parent. It is created upon the death of the parent as part of their estate plan. Anyone can contribute to a third party SNT thus allowing people other than parents to name the trust in their will or as a beneficiary.

There are pros and cons to each type of trust and it is crucial that all aspects are discussed with an attorney when deciding to create one of these types of trusts.

The Facts

Special Needs Planning Overview


There are several types of trusts to assist with these special planning challenges. The most common types are Support Trusts and Special Needs Trusts.

  • Support Trusts:  Support Trusts require the Trustee to make distributions for the child’s support in areas like food, shelter, clothing, medical care, and educational services. Beneficiaries of Support Trusts are not eligible to receive financial assistance through Supplemental Security Income (SSI) or Medicaid. If your child will require SSI or Medicaid, you should avoid a Support Trust.
  • Special Needs Trusts:  For many parents, a Special Needs Trust is the most effective way to help their child with a disability. A Special Needs Trust manages resources while also maintaining the child’s eligibility for public assistance benefits.

There are two types of Special Needs Trusts:

  • Third-Party Special Needs Trust:  Created using the assets of the parent(s) as part of an estate plan; distributed by a Will or Living Trust.
  • Self-Settled Special Needs Trust: Generally created by a parent, grandparent or legal guardian using the child’s assets to fund the Trust (e.g., when the child receives a settlement from a personal injury lawsuit and will require lifelong care). If assets remain in the Trust after the child’s death, a payback to the state is required, but only to the extent the child receives public assistance benefits.

Special Needs Trusts are a critical component of your estate planning if you have loved ones with disabilities for whom you wish to provide after your passing. Generally, Special Needs Trusts are either stand-alone trusts funded with separate assets (like life insurance) or they can be sub-trusts in existing living trusts.

Calculating Your Loved One’s Future Financial Needs

This calculator can help you project the future expenses of an individual with special needs.

Special Needs Calculator from Merrill Lynch

Special Needs Estate Planning Online Resource Center


Planning for your loved one with special needs requires extensive research to become a well-educated advocate. You will want to keep up-to-date on the latest medical, educational, financial, and legal changes. Hunter Estate & Elder Law provides assistance to you and your family in addressing your unique concerns. We hope this Special Needs Resource Center provides you with a quick reference to find the additional resources you may need.

  • Social Security Resources:
    Benefits for Children with Special Needs
    Social Security Benefits Eligibility Screening Tool
  • Handbook for Trustees: A special needs trust can be a very powerful aid in managing care for a family member with a disability. It can provide supplemental items like therapy, respite care, dental work, companions, entertainment, education — all without interfering with the beneficiary’s SSI, Medicaid or other government programs. The special needs trust can be a flexible tool. It can also be very difficult and confusing to administer. Download a free copy of the Handbook for Trustees
  • Exceptional Parent online: Online resource for the special needs community, including families, caregivers, physicians, allied health care professionals, and teachers.
  • The Arc: The Arc is a national organization of and for people with mental disabilities and related developmental disabilities and their families. The Arc works to promote and improve support and services for people with mental disabilities and their families and also fosters research into and education about the prevention of these disabilities in infants and young children.
  • National Academy of Elder Law Attorneys: The National Academy of Elder Law Attorneys is a non-profit association that assists lawyers, bar organizations and others who work with older clients and their families. The Academy provides information, education, networking and assistance to those who deal with the many specialized issues involved with legal services to the elderly and people with special needs.
  • National Alliance on Mental Illness: The National Alliance on Mental Illness (NAMI) is dedicated to improving the lives of persons living with serious mental illness and their families. There are NAMI organizations in every state and in over 1,100 local communities across the country.
  • Center for Parent Information and Resources: The Center for Parent Information and Resources (CPIR) serves as a central resource of information and products to the community of Parent Training Information (PTI) Centers and the Community Parent Resource Centers (CPRCs), so that they can focus their efforts on serving families of children with disabilities. Use this interactive map to find the PTI or CPRC that serves your State or territory.
  • Annual Disability Statistics Compendium: This publication, the first Compendium, focuses on state-level statistics published by Federal agencies.