Special Needs Trusts

Special Needs Trusts FAQs

by Rania Combs

If you are a parent of a child with special needs, your estate planning should include a special needs trust.

Closeup of mother holding her children hand.

Why? Because if you leave assets directly to your child, either in a will or through the intestacy statutes if you die without a will, the inheritance your child receives may jeopardize your child’s ability to receive benefits under government programs such as Supplemental Security Income (SSI) and Medicaid.

A special needs trust (SNT), also known as a supplemental needs trust, can help preserve your child’s eligibility for public benefits while providing for supplemental needs that will enhance his or her life. Below are answers to frequently asked questions about special needs trusts.

What is a special needs trust?

A SNT is a discretionary trust that holds the property of a disabled beneficiary and directs distributions to the beneficiary in a way that preserves his or her eligibility for public benefits.

What is the benefit of a special needs planning?

Supplemental Security Income (SSI) and Medicaid are government programs that offer support to disabled individuals.  SSI is a needs-based program that is only available to people who meet certain income and resource limitations. In many states, people receiving SSI automatically qualify for Medicaid, which can help pay for expensive medical care. Loss of these benefits can be catastrophic.

To qualify for SSI and Medicaid, a single person must own less than $2,000 of countable assets. Those with countable assets greater than $2,000 can lose their eligibility for benefits. That’s why it’s generally a bad idea to give assets, either as a gift or inheritance, directly to a loved one who receives government assistance. It is also why some parents actually consider disinheriting their children.

How does a SNT work?

Not all trusts will work to preserve a disabled beneficiary’s benefits. Support trusts, which direct distributions for the health, welfare, and support of a beneficiary, can disqualify a disabled beneficiary. This is because the assets in a support trust are counted as the beneficiary’s resource.

A SNT is a discretionary trust. It permits distributions from trust funds to supplement, not replace, a beneficiary’s government entitlements. To maintain eligibility for needs-based support, the beneficiary cannot have control over the assets in the SNT. The beneficiary cannot manage the assets. The beneficiary also cannot have the right to demand distributions of income or property from the SNT, name the Trustee or change the terms of the SNT. The Trustee has complete discretion about what distributions to make for the beneficiary.

Beneficiaries of properly drafted special needs trusts do not have legal claim to the property in the trust. That means that the trust assets are not countable resources and do not affect the beneficiaries’ eligibility for benefits. As a result, the beneficiaries can continue receiving government benefits, while still enjoying the benefits of the property in the trust for supplemental needs.

Who can serve as trustee of a special needs trust?

The Trustee can be a family member, friend, or private professional Trustee. In the case of a stand alone SNT, the person making the gift can also serve as trustee.

An SNT can help you provide for your child without jeopardizing his or her eligibility for benefits under SSI and Medicaid. If you are a parent of a child with special needs, a SNT should be an essential part of your estate planning.

How to set up a SNT?

If no assets will pass to your child until after you pass away, you may want to create a testamentary SNT. A testamentary SNT is a trust that will spring to life after you pass away. Provisions in your Will or Living Trust direct that all assets left to your child will be held in an SNT rather than being distributed outright or in a support trust. The trust will not exist until after you have died.

A stand-alone SNT is a trust that goes into effect immediately. This type of trust is beneficial if you want to start transferring funds immediately to the trust. It is also useful when multiple family members or friends want a vehicle to which they can contribute during their life or after their death. Rather than having to include special needs provisions in their planning, friends and family members can name the SNT as a beneficiary in their Wills or Trust. Also, because the trust will exist immediately, they can list the trust as a beneficiary of a life insurance policy, brokerage account, or retirement plan.

An attorney can explain all your options and help you determine which tool is right for you.

This article was initially published on October 11, 2010 and updated on January 8, 2024.

About Rania

Rania graduated magna cum laude from South Texas College of Law Houston and is the founder of Rania Combs Law, PLLC. She has been licensed to practice law since 1994 and enjoys helping clients in Texas and North Carolina create estate plans that give them peace of mind.

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  1. Dan Crabb

    January 6, 2015 at 12:29pm

    What specifically can a Supplemental Needs Trust pay for? Can it pay for medical needs only, or can it pay for everyday living expenses?

    Thank you

    1. Rania Combs

      January 6, 2015 at 12:52pm

      The following article will answer your question: What Supplemental Expenses Can a Special Needs Trust Pay For?

  2. Texas Pooled Special Needs Trust- -Texas Wills and Trusts Law

    January 23, 2017 at 11:39am

    […] way that preserves the beneficiary’s eligibility to receive public benefits. A pooled trust is a special needs trust established by a non-profit […]

  3. Paula Jones

    May 5, 2021 at 11:05am

    Can I set up a First Person Special Needs Trust without an attorney?

    1. Rania Combs

      May 5, 2021 at 11:25am

      Unless you plan on signing a Joinder Agreement to establish a Master Pooled Trust sub-account with an organization like the Arc of Texas, I would recommend you engage an attorney to advise you and draft the trust document. Even those planning to sign a joinder agreement would benefit from the advice of an attorney.

  4. Sandeep Reddy

    June 13, 2021 at 12:04am

    My aunt is planning on creating a WILL that would create a Special Needs Trust (SNT) for my son (upon execution of her WILL). My son is 19 years old with Autism and not on SSI or Medicaid or any other government program yet (he is eligible though). If my son is not on SSI/Medicaid at the time of WILL execution can the SNT still be created?
    Basically, is it required for the beneficiary to be on SSI or Medicaid for the SNT to be created, at the time of creation.

    1. Rania Combs

      June 14, 2021 at 11:34am

      It is possible to create a supplemental needs trust for someone who is eligible for Medicaid and SSI, even though they are not currently receiving those benefits. In Texas, it is permissible to create a discretionary supplemental needs trust in which the trustee has full discretion to make distributions even to the extent of causing the beneficiary to forfeit some but not all government benefits.