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What is a Special Needs Trust?

Mary McMahon
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Updated: May 17, 2024
Views: 4,567
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A special needs trust, also known as a supplemental needs trust, is a type of trust which names a person with disabilities as a beneficiary. Such trusts are designed to protect assets intended for use by the beneficiary, while also protecting the beneficiary from the vulnerability to economic abuse experienced by many people with disabilities. Such trusts are usually set up by family members, and they can be administered by a member of the family, an appointed trustee, or a trustee appointed by a court, in some cases.

One common problem for people with disabilities is that if they inherit money, they are deemed ineligible for government benefits which they would otherwise be entitled to. As a result, they are forced to use their inheritance to pay for their care and other associated costs of living, and they quickly eat through the money. Likewise, people with disabilities who hold title to property may be denied benefits. The structure of government benefits systems essentially forces people to be poor and without property in order to get needed benefits. Unfortunately, these benefits also rarely cover all needed costs, putting people in an awkward position.

Under a special needs trust, the person with disabilities does not actually own the things being held in trust. Thus, he or she remains eligible for government benefits. The trust can be used to provide supplemental care, such as payments for treatments the government does not cover, money for food, and so forth. The beneficiary could even live in a house held by the special needs trust, as for example if the parents of a disabled child would like their child to “inherit” the family home.

Having assets held in a special needs trust can also protect people with disabilities from economic abuses. These abuses can come from partners, caregivers, and others, and can be a very serious problem, especially for people with intellectual disabilities. When a disability trust is created, the trustee controls the funds, and can make sure that they are used for the benefit of the person with disabilities named as a beneficiary, rather than ending up in the hands of someone else.

It is highly advisable for such trusts to be established, even if a family is wealthy and is not concerned about protecting a family member's government benefits. The trust can be set up as a revocable living trust which allow people to add to and change the terms of the trust as needed during life, with a secondary trustee being named to take over administration after death. It is important to work with a lawyer who has experience in this area when establishing a special needs trust to make sure that it is properly arranged.

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Mary McMahon
By Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a WiseGeek researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.

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Mary McMahon
Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a...

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