Special Needs Trusts

When someone thinks they need a special needs trust, we start by asking a lot of questions. How old is the individual? Does the individual currently receive public benefits, and if so, what kind? Where are the funds coming from and how much will the individual receive? Does the individual have legal capacity to create and fund a trust? Is there a trusted person who will serve as trustee? The answers to these questions guide our attorneys to choose the right special needs planning strategy.

Often, a special needs trust (SNT) is the right tool. An SNT ensures that an individual with disabilities can benefit from trust assets while preserving eligibility for essential government benefits like SSI and MaineCare. While assets held in the trust are not countable for the purpose of qualifying for such programs, there are strict regulations regarding disbursements. SNTs are meant to supplement the funds and services available through government programs.

A few reasons why an SNT might be recommended:

• Planning for a loved one who is disabled
• Receipt of an inheritance
• Receipt of a personal injury settlement or malpractice settlement

First-Party Special Needs Trusts

An individual with disabilities may transfer their own assets to a first-party or self-settled SNT. These funds are often from a personal injury settlement or inheritance. The individual is the beneficiary of the trust. A trustee is responsible for managing and distributing trust assets for the individual’s benefit. The individual with disabilities must be under age 65 at the time the trust is established and funded. Any funds remaining in the trust at the beneficiary’s death must first reimburse Medicaid before being distributed to any remainder beneficiary.

Third-Party Supplemental Needs Trusts

A third-party SNT (often called a supplemental needs trust) is designed to hold assets from individuals other than the beneficiary, such as parents, relatives, or friends. Typically, this trust is set up as part of the third party’s estate plan, but it can also be part of a broader asset preservation strategy when the third party receives public benefits as well.

Trustee Guidance

The primary responsibility of a trustee of a special needs trust is to manage the trust in a way that benefits the beneficiary. If the beneficiary relies on means-tested public benefits, the trustee must understand how distributions from the trust affect eligibility for those benefits. Understanding these implications is essential to ensuring the trust effectively supports the beneficiary's financial well-being while preserving access to necessary government assistance. Our team routinely advises trustees on proper administration of special needs trusts.

Learn More about Special Needs Trusts

We welcome you to browse our articles on special needs planning.

For more information about special needs trusts, the website of the Special Needs Alliance (SNA) is a fantastic resource for families. Consider signing up to receive The Voice newsletter. You can also download Administering Special Needs Trusts: A Handbook for Trustees.

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We would be honored to meet with you to discuss special needs planning for you or a loved one. Get started here.