Special Needs Trust: How to Build a Plan for Your Family

Jeff Vistica

CFP®, ChSNC®, AIF®

February 1, 2023

If you are a parent of a child with intellectual and developmental disabilities, you confront daunting challenges in your daily life and planning for the future. Some of these financial challenges require a special needs financial planner to help make informed decisions and build a strong financial safety net.

Saving money and providing for your child without losing public benefits may also be a problem. These benefits can be significant and may include the following:

Medicaid
Medicaid Home and Community-Based Services
Medicare
Supplemental Security Income
Social Security Disability Insurance
Social Security Disabled Adult Care
Supplemental Nutrition Assistance Program
Housing Choice Vouchers

There may be other benefits depending on where you live.

Fortunately, a solution may permit you to accomplish both goals. It’s called a “special needs trust.” However, keep in mind that special needs trusts aren’t right for every situation.

The beneficiary of the trust won’t have control over the funds in the trust.
The beneficiary will have to rely on the trustee of the trust, who will have discretion over whether to grant a distribution request.
The trust may be required to pay back Medicaid upon the beneficiary’s death, which can deplete the remaining assets in the trust.
There are limitations¹ on what the funds can be used for without impacting eligibility for government benefits like Medicaid and Supplemental Security Income.

Examples of expenses from a special needs trust that may raise issues include cash, food, restaurant meals, rent, mortgage payments, homeowners or condo dues, and utilities.² You can find examples of permissible distributions here.

If you are considering a special needs trust, here’s what you need to know about them.

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