special needs trust

Special Needs Trust: What It Is and When to Use It

Michael W. Cohen, CPA, CGMA Personal Finance 1 Comment

special needs trust

A special needs trust should be considered by parents or other caretakers of someone with a physical or mental disability. This financial vehicle offers several benefits including - importantly - maintaining eligibility for Supplemental Security Income (SSI) or Medicaid.

Special needs trust overview

A special needs trust is a permanent trust designed for a person with a physical or mental handicap. Special needs trusts are usually established by parents for a disabled child, although it’s possible to set one up for yourself. In either case, the trust must be established before the beneficiary turns 65.

Special needs trusts can be funded in various ways. Some examples are life insurance policies, annuities, inheritances, family assets, gifts and lawsuit awards.

Benefits of a special needs trust

Assets in a special needs trust are protected from creditors and litigation. Trust assets are excluded from income and asset limits for government assistance programs such as SSI. This limit is generally $2,000, which obviously could exclude a lot of people.

To qualify for exemption from this limit, assets in a special needs trust can’t be used for housing or food. Funds can be used for transportation, medical expenses, vehicles, home furnishings, caretaker payments, and other legally-allowed expenses. A trust’s beneficiary cannot receive funds directly. Instead, a trustee oversees the use of a trust’s funds for approved expenses.

By putting funds in a special needs trust instead of other financial vehicles, i.e. a bank account, you can help ensure that the trust’s beneficiary does not become the victim of financial exploitation. A special needs trust is also a good tool to ensure that funds are spent wisely and legally. By establishing a special needs trust as part of a larger financial plan, you’ll be able to maximum the legal and financial benefits for a disabled person while minimizing risks.

A qualified attorney must set up the trust

Due to the complexities of special needs trusts, it’s best to use an attorney to establish this legal arrangement. The legal expert will be able to answer any questions you have, ensure that the trust complies with federal and state laws, and maximize all financial benefits.

Don't forget the ABLE account

Another financial vehicle to consider, which can be used for the benefit of individuals with disabilities, is the ABLE savings account. While special needs trusts are established with substantial funding (typically $10,000 - $100,000), an ABLE account can be opened with as little as $25 in some states.

Knowing which accounts to open under what circumstances can be an overwhelming task. If you need assistance with your financial planning, contact Glass Jacobson today!


Securities offered through Triad Advisors, LLC, member FINRA/SIPC. Advisory services offered through Glass Jacobson Investment Advisors, LLC. Glass Jacobson Investment Advisors is not affiliated with Triad Advisors, LLC.


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Michael W. Cohen, CPA, CGMA

Michael W. Cohen, CPA, CGMA

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Comments 1

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    Its good to know that a trust’s beneficiary cannot receive funds directly. I wanted to fund one of my friend’s son’s trust but I didn’t know if the trustee could take my money when I send it over. I appreciate you helping me learn more about special need’s trust funds.

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