Protecting the financial future of a loved one with special needs is challenging. One way to safeguard their financial security is by setting up a special needs trust or SNT. This trust can help ensure your loved one receives the required care while preserving their eligibility for government benefits. This article will discuss what it is and why you should consider having one.

Special Needs Trust

What is it?

SNT is a legal arrangement that holds assets for the benefit of a person with a disability and is managed by a trustee responsible for using the trust assets to provide for the beneficiary’s needs without jeopardizing their eligibility for government benefits. Establishing such an assurance can be initiated by the person with a disability, a family member, or by following the legal process through a court.

Different Types of Trusts

The two primary types of trusts with special needs are first-party and third-party trusts. 

Funded by assets belonging to the beneficiary, such as a personal injury settlement or an inheritance, a first-party trust is established. These trusts are subject to strict rules and regulations, and any remaining funds must typically be paid back to the government upon the beneficiary’s death.

A trust designed for individuals with special requirements established by someone other than the beneficiary, typically a family member, is known as a third-party trust. It is financed with assets owned by the trust creator, and any remaining funds may be dispersed to other beneficiaries after the beneficiary’s passing. This form of trust is the most prevalent.

What are their benefits?

Preserves Eligibility for Government Benefits

It allows the beneficiary to remain eligible for essential government benefits, which is achieved by ensuring that any funds in the trust are not counted towards the beneficiary’s asset limit for SSI and Medicaid eligibility. Therefore, the trust can provide much-needed financial support while preserving the beneficiary’s eligibility for these vital programs.

Supplements Government Benefits

The trust can provide additional funds to improve the beneficiary’s quality of life. The funds cover expenses not covered by government programs, such as medical expenses, housing, education, and transportation. It ensures that the beneficiary has a more comfortable and fulfilling life.

Protection of Assets

Creating an SNT also ensures that the assets intended for the beneficiary’s care are protected from creditors or legal action. This is important where the beneficiary receives a settlement, such as a personal injury settlement, and needs to safeguard those assets from being used to repay creditors or other legal obligations.

Flexible Use of Funds

The funds within an SNT provide for various expenses related to the beneficiary’s well-being. It includes purchasing medical equipment, paying for healthcare expenses, providing education and transportation, and funding recreational activities. Its flexibility allows for customization of how the funds are used to suit the unique needs of the beneficiary.

Peace of Mind for Families

Establishing a special needs fund provides peace of mind for the family, knowing that the beneficiary’s financial future is secure, which is especially important for children with special needs. By setting up an SNT, the concerned parents ensure their child will receive the necessary financial support even after they are gone.

Creating a special needs trust effectively safeguards the financial future of a family member with special requirements. Through this method, you can ensure they receive the necessary care while still retaining their eligibility for government benefits. 


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