People receiving needs-based benefits can lose eligibility if they own too many assets. A special needs trust holds money for them without counting as their own for most purposes.
Types
- First-party trusts, funded with the person's own money, such as a settlement, usually with a payback to Medicaid at death.
- Third-party trusts, funded by family, with no payback requirement.
- Pooled trusts managed by nonprofits.
What it can pay for
- Education, therapy and recreation.
- Transportation and travel.
- Technology and equipment.
- Care not covered by benefits.
Cautions
Payments directly to the beneficiary for food or shelter can reduce some benefits. A trustee must manage the trust carefully, and rules are technical. Mistakes can cause loss of benefits.
Getting started
- Meet with an attorney experienced in special needs planning.
- Decide the type and the trustee.
- Update wills and beneficiary forms so assets go to the trust, not directly to the person.
- Keep records of trust spending.
- Review as laws and needs change.
Frequently asked questions
Can parents leave money directly to a child with a disability?
It can disqualify benefits, so use a trust.
Does the trust need a court?
Not always. Some require court approval.