Legal Definitions - supplemental needs trust

A supplemental needs trust (also commonly known as a special needs trust) is a specific type of legal arrangement designed to hold assets for the benefit of a person with a disability. Its primary purpose is to allow the beneficiary to receive financial support for their "supplemental" needs—those not covered by government programs—without jeopardizing their eligibility for essential public benefits like Medicaid or Supplemental Security Income (SSI).

These trusts are carefully structured to pay for items and services that enhance the beneficiary's quality of life, such as personal care attendants, specialized medical equipment not covered by insurance, education, recreation, or travel. By holding assets in this type of trust, the funds are not considered to be directly owned by the beneficiary, thus preserving their eligibility for government programs that provide for basic needs like food, shelter, and medical care.

• Example 1: Inheritance for a Disabled Child

  Imagine a scenario where Maria, a young woman with a severe intellectual disability, is set to inherit a significant sum of money from her deceased aunt. If the inheritance were given to Maria directly, her assets would exceed the strict limits for government assistance programs like Medicaid and Supplemental Security Income (SSI), causing her to lose access to crucial medical care and income support.

  To prevent this, Maria's parents establish a supplemental needs trust. The inheritance is placed into this trust, which is managed by a trustee. The trust funds can then be used to pay for things that enhance Maria's life, such as accessible transportation, specialized therapies not covered by Medicaid, or recreational activities. This arrangement ensures that Maria continues to receive her essential government benefits for basic living expenses and medical care, while the trust provides for her additional needs and comforts.

• Example 2: Personal Injury Settlement for a Newly Disabled Adult

  Consider John, an adult who suffers a debilitating accident that leaves him permanently disabled. He receives a large settlement from the at-fault party to compensate him for his injuries and future care. If John were to hold this settlement directly in his own name, he would be disqualified from receiving vital government assistance for his ongoing medical needs and daily living expenses.

  John's legal team advises him to place the settlement funds into a supplemental needs trust. This allows the trust to pay for items like a custom-fitted wheelchair, home modifications for accessibility, or a personal assistant, all of which improve his quality of life and independence. Crucially, because the funds are held in the trust, John remains eligible for government programs like Medicaid, which cover his essential medical treatments and long-term care, without the settlement funds counting against his asset limits.

• Example 3: Estate Planning for a Child with Lifelong Disability

  Sarah and Tom have a son, Ben, who has a lifelong developmental disability. They want to ensure Ben is financially secure and well-cared for after they are no longer able to provide for him, but they also know he will rely on government benefits throughout his life for basic support.

  As part of their estate plan, Sarah and Tom create a supplemental needs trust, naming Ben as the beneficiary. They arrange for a portion of their assets, such as life insurance proceeds or a share of their estate, to be transferred into this trust upon their passing. The trust funds can then be used by the trustee to pay for things that enrich Ben's life, such as educational programs, assistive technology, or outings, without disqualifying him from essential government benefits like SSI for income and Medicaid for healthcare. This provides a safety net and enhances Ben's life without jeopardizing his public assistance.