A special needs trust (also called supplemental needs trusts) is created to ensure that a beneficiary who is disabled in any way and receiving government benefits or an insurance or personal injury settlement does not lose their government benefits or settlement proceeds due to an inheritance. Many government programs – including Social Security disability, Medicaid and Veteran benefits like Aid and Attendance – have asset and income limits.
Special needs trusts are frequently used to receive inheritance or personal injury or insurance settlement proceeds on behalf of a disabled person. Special needs trusts can be used to supplement the government income the disabled person is receiving for expenses such as private rooms, medical treatments not covered by benefits, personal items (e.g. clothing, vehicles, computers), and numerous other services/items. The key is to not put the trust funds into the disabled person’s bank account, but to assist him/her by directly paying for items/services he/she needs.
The trustee of a special needs trust may be a trusted family member or friend or a bank or trust company. Great care should be taken in the choice of an appropriate trustee(s) to manage the trust assets and care needs of the disabled person.