Special Needs Trust

Parents of children with special needs have unique challenges in planning for the future of their children.

Many parents do not realize that:

  • When you receive your Social Security retirement or disability benefit, or your family receives a Social Security benefit, your Special Needs child could be disqualified from Medicaid.
  • Leaving your Special Needs child an inheritance greater than $2,000 could also disqualify them from Medicaid.
  • Leaving the Special Needs child’s inheritance to their sibling could have significant negative legal and financial impact on that sibling. (More on that later.)
The best way to address all of these concerns is to set up a Special Needs Trust, which we can create at a price that middle-income Americans can afford. You will no longer lie awake at night worrying about how to take care of your child.


A trust is a legal document that holds title to your assets, and lists where your hard earned assets go when you have passed on. Think of the trust as a “box” into which you deposit your assets.

On the “box” are instructions regarding what is to happen with the assets in the box:

  1. While you are alive
  2. If you become disabled
  3. At your passing

After the “five year and a day” look back period, assets which have been transferred to a trust are not counted against the $2,000 limit to qualify for Medicaid. A Special Needs trust can pay for expenses that are not covered by Medicaid or SSI – for example, having a tooth capped instead of extracted. There are no attorney fees, conservator fees, or accounting fees.

  1. There is no way to require the sibling to use the money for the benefit of the Special Needs child.
  2. The Special Needs child will have to ask their sibling for money whenever they feel it is needed, which can create a very uncomfortable situation. (I need a new car to get to work; no you don’t.)
  3. In case of a divorce, or bankruptcy, those funds belong to the non-disabled sibling and will become part of the final ruling.
  4. And finally, a will must go through probate, which is time consuming, invasive and expensive.

The most common way to fund a Special Needs trust is with a life insurance policy. Other assets may also be put in the trust.

The trustee. During your lifetime, you can be the trustee and make these decisions. A successor trustee will take over when you have passed away.

The new caregiver may have expenses in the beginning (for example, making their house accessible). Also, the guardian or caregiver may need to pay for help in the house, and have occasional respite care. You may want to set up a second trust for a successor caregiver to pay for these needs.

Another choice that we have is a Safeguard Trust which allows the needs of the caregiver to be paid for without a special trust. In addition to providing for the needs of the Special Needs child, a Safeguard Trust will also shelter your assets so they are not lost if you need Long Term Care in the future, and will protect your wishes for other beneficiaries.