What are Special Needs Trusts?

Special needs trusts are types of irrevocable trusts that are designed to provide financial support and protect the assets of individuals with disabilities, while also preserving their eligibility for government benefits. These trusts are sometimes called “supplemental needs trusts.”

The purpose of a special needs trust is to provide for the needs of an individual with a disability
while also ensuring that they can still receive government benefits such as Supplemental Security
Income (SSI) and Medicaid. If the individual with a disability were to receive an inheritance or
other assets directly, they might lose their eligibility for these benefits, which could be
financially devastating.

There are two main types of special needs trusts: third-party trusts and self-settled trusts.

1. Third-party trusts: A third-party special needs trust is created by someone else, such as a parent or grandparent, to provide for the needs of the individual with a disability. The assets in the trust do not belong to the individual with a disability, but are held in trust for their benefit. These trusts can be created during the lifetime of the person creating the trust, or in their will.
2. Self-settled trusts: A self-settled special needs trust is created by the individual with a disability, using their own assets, such as a personal injury settlement. These trusts are subject to certain restrictions, such as the requirement that the trust must be irrevocable and that the trust must include a payback provision to reimburse the government for certain benefits provided during the individual’s lifetime.

Special needs trusts are an important tool for individuals with disabilities and their families to provide for their care and support, while also preserving their eligibility for government benefits. It is important to work with an experienced attorney to create a special needs trust that meets the specific needs of the individual and complies with all legal requirements.

Are you still unsure about whether a Special Needs Trust is necessary for your loved ones? Contact an experienced estate planning lawyer today. We serve families living in Virginia, the District of Columbia, and Maryland. Call us at 571-500-7334 or send us an email at matt@degioialaw.com to schedule your initial consultation today!