What is a Special Needs Trust?
A Special Needs Trust is a very beneficial tool that can dramatically improve the quality of life for someone who receives one or more public benefit programs like Medicaid or Supplemental Security Income (SSI).
A Special Needs Trust is a very specific kind of trust that offers the option of keeping someone eligible for public benefit programs while also receiving the benefit of a supplemental fund. This supplemental fund can pay for an entire range of services and goods that are not covered by public programs.
Special Needs Trusts can be established with funds that belong to the person who is receiving public benefit programs or with funds that belong to someone else such as one or more family members. Different rules will apply depending on whose funds are used to establish the Trust, but the person receiving public benefits will still receive the same benefit from the Trust no matter which rules apply. The public benefit recipient will still receive the same benefit from the Trust because they will always be the Trust beneficiary.
There are several kinds of Special Needs Trusts with different names, but they all share the common trait of maintaining eligibility for asset tested public benefit programs. The names that are used to describe these different kinds of Special Needs Trusts can be confusing, but they do not need to be. Just keep in mind that there are only three different kinds of Special Needs Trusts, and they are not confusing if explained in plain English.
Trusts that are funded by family members of the Trust beneficiary are normally called Third Party Special Needs Trusts to indicate that the assets funding the Trust originally belonged to someone other than the Trust beneficiary. By contrast, Trusts that are funded by the Trust beneficiary are often referred to as Self-Settled Special Needs Trusts to indicate that the assets funding the Trust originally belonged to the Trust beneficiary.
Self-Settled Special Needs Trusts come in two varieties, non-Pooled and Pooled. A non-Pooled Special Needs Trust is established for one Trust beneficiary, and the Trustee can be anyone who is qualified to act as Trustee. This is the kind of Trust most people refer to when they use the term Special Needs Trust. However, a lot of the confusion about Special Needs Trusts comes from the fact that many people use the term generically without a clear understanding of the differences between Trusts. It is ok to use the term generically, but it is also important to have a good understanding so you do not perpetuate any confusion.
A Pooled Special Needs Trust is also established for one Trust beneficiary, but the Trustee cannot just be anyone who is qualified to act as Trustee. By contrast, Pooled Trusts must be established and administered by a non-profit association. You can find additional information about each kind of Special Needs Trusts on our website, but to summarize the differences, here are the three basic types:
Third Party Special Needs Trusts, which are funded with the assets of someone other than the Trust Beneficiary;
Non-Pooled Special Needs Trusts, which are funded with assets belonging to the Trust beneficiary; and,
Pooled Special Needs Trusts, which are also funded with assets belonging to the Trust beneficiary.