Understanding how special needs trusts work

On Behalf of | May 1, 2024 | Trusts

A special needs trust (which is also called a “supplemental needs trust”) is a particular kind of irrevocable trust that is designed to enhance the quality of life for people with disabilities who rely on government programs like Supplemental Security Income (SSI) and Medicaid for support.

Essentially, these trusts make it possible for parents, grandparents and other loved ones to set aside money for their disabled loved ones without interfering with their entitlement to those all-important benefits.

How can the funds in a special needs trust be used?

When money is put directly into a beneficiary’s hands, they can lose their eligibility for income-based government assistance. That makes it critical to understand how the monies from a special needs trust can – and cannot – be used. 

In general, assets in this kind of trust cannot be used to directly pay for the beneficiary’s rent and utilities, since those are part of what their SSI and other government benefits are supposed to provide. But the funds can be used for things like:

  • Modifications to their home for disability access
  • Furniture that they may need, such as a bed, sofa or chairs
  • Entertainment devices, such as a television, computer or gaming device
  • Outings, such as to the movies, the zoo or vacations 
  • Special therapies, camps or respite care not covered by insurance
  • Hearing aids, glasses and mobility aids not covered by insurance
  • Clothing, shoes and accessory items
  • Special services, including attendant care or a home health aide
  • Transportation, including Uber or Lyft rides or a bus pass

When setting up this kind of trust, you must understand both its uses and its limitations – and so should the person that you designate as the trustee (or successor trustee). Legal guidance can make it easier to understand the steps involved so that you can properly protect your loved one’s future comfort.