Special Needs Trust – A Vital Part of Your Estate Plan | OneDigital (2024)

Money Matters

Blog Home

Read More

Special Needs Trust – A Vital Part of Your Estate Plan

AuthorOneDigital Education


Read Time 4 minutes

Based on the latest Census Data, there are over 42.5 million Americans with disabilities, making up 13% of our population. This group includes people with hearing, vision, cognitive, walking, self-care or independent living difficulties.

Although many provide for themselves financially and lead an independent life, many others will not. Some of these individuals will need extra help and financial assistance during their lifetimes. Parents, other relatives or friends will provide income and will set aside funds to provide this needed help long into the future.

Consider this scenario: Take parents with a child who cannot live independently or provide for themselves; during the time the parents are alive, the child will be taken care of, living at home with the parents who are providing the support and care as needed. But what happens when the parents pass away or can no longer care for the child? Without another family member to step in, an institutional or other living solution will be required. What will the ongoing costs be? How long will this support be needed? How much in assets will be required to fund this care?

In addition to those questions, there are complexities in providing these funds. One major issue is coordinating benefits with federal, state, and local programs. If funds are held directly by the affected individual, benefit programs they could be eligible for may be limited or withheld entirely. In many cases, due to the coordination required, assistance can and should be provided through a carefully constructed estate planning tool, commonly known as a Special Needs Trust (SNT).

What is a Special Needs Trust?

A Special Needs Trust (SNT), also known as a Supplemental Needs Trust, is a legal arrangement designed to benefit an individual who has a disability. The trust is set up to manage assets and other resources while also allowing the beneficiary to be able to maintain eligibility for benefit programs offered through federal, state and local entities.

Why is a Special Needs Trust Important?

An SNT is critical because it makes sure that a beneficiary can receive gifts, settlements or an inheritance without losing eligibility for Federal programs like Medicaid or Supplemental Security Income (SSI) as well as state and local programs. It addresses the unique needs of the beneficiary by providing financial support without disrupting their access to public assistance.

Functions of a Special Needs Trust

  • Asset Management: Holds and protects assets for a person with special needs, ensuring these assets do not disqualify them from public assistance.
  • Supplemental Support: Provides funds for expenses not covered by government benefits, such as personal items, personal care attendants, out-of-pocket dental and medical expenses, education, transportation, and activities.
  • Preservation of Benefits: Ensures assets in an SNT are not counted towards the beneficiary’s eligibility for means-tested government programs.
  • Fiduciary Oversight: A trustee manages the trust assets for the beneficiary’s benefit, distributing funds based on the individual’s needs as outlined in the trust.

Types of Special Needs Trusts

  • Third-Party SNT: Created using assets from someone other than the beneficiary, typically funded by parents or other family members through gifts or inheritance.
  • First-Party SNT: Funded with the beneficiary’s own assets, often from an inheritance or settlement. This type of trust allows the beneficiary to remain eligible for public assistance but may be subject to Medicaid’s repayment rules at the death of the beneficiary.

Establishing a Special Needs Trust

Creating an SNT involves drafting a trust document, which specifies how the trust will operate, and transferring assets into the trust. It requires careful planning and the assistance of an attorney experienced in disability and trust law to ensure compliance with all legal requirements that are necessary to avoid jeopardizing the beneficiary’s eligibility for public assistance. One of the most important considerations is the selection of a trustworthy and competent trustee as well as back-up trustees who will be able to manage the trust for the lifetime of the beneficiary.

Advantages of a Special Needs Trust

  • Financial Security: Provides a means to financially support a disabled individual without affecting their government aid.
  • Control: The grantor can stipulate how the trust’s assets are to be used for the beneficiary’s benefit.
  • Flexibility: Can be tailored to the specific needs and circ*mstances of the beneficiary.

Careful planning for a vulnerable loved one who will require future assistance is essential. Although caring for this individual can be overwhelming, investing the time and funds needed to create a proper set of documents, like a Special Needs Trust, is well worth it.

Planning for the future and becoming savvy about your own financial picture is critical to secure peace of mind for you and your loved ones. Visit OneDigital’s Money Matters blog for more fresh thinking and resources to help you accomplish your goals.

If you’re ready to connect with someone to learn more, reach out to OneDigital’s Wealth Management team.

Investment advice offered through OneDigital Investment Advisors LLC, an SEC-registered investment adviser and wholly-owned subsidiary of OneDigital. These materials are provided for informational and educational purposes only and do not constitute a recommendation to buy, sell, or hold any security, nor do they constitute legal, accounting, investment, or tax advice. The materials and the information provided are not designed or intended to be applicable to any person’s individual circ*mstances. These statements do not constitute an offer or solicitation in any jurisdiction. All included information and data are limited only to the inputs and other financial assumptions indicated.

About the Author

Special Needs Trust – A Vital Part of Your Estate Plan | OneDigital (1)

OneDigital Education

Get in touch

  • Meet the Corporate Team

Read More

Ready to take charge of your financial future?

Contact OneDigital to talk with a dedicated member of our wealth management team today.

Previous PostInside the Pressure Cooker: What plan sponsors should be watching this renewal season

Next PostWhat Health Plan Sponsors Should Know About Covering Gene Therapies

Related News & Updates


Ensuring Financial Security and Wellbeing for Aging Parents


Read more


Elizabeth Chrane Offers Insight on Supporting Working Parents During Layoffs and Economic Uncertainty


Read more


Middle Managers are the Retention Elephant in the Room


Read more


Compliance Reminder: Payroll Contributions for Washington Long-Term Care Act Begin on July 1, 2023


Read more

All OneDigital Posts

Special Needs Trust – A Vital Part of Your Estate Plan | OneDigital (2024)
Top Articles
Latest Posts
Article information

Author: Tish Haag

Last Updated:

Views: 6123

Rating: 4.7 / 5 (47 voted)

Reviews: 94% of readers found this page helpful

Author information

Name: Tish Haag

Birthday: 1999-11-18

Address: 30256 Tara Expressway, Kutchburgh, VT 92892-0078

Phone: +4215847628708

Job: Internal Consulting Engineer

Hobby: Roller skating, Roller skating, Kayaking, Flying, Graffiti, Ghost hunting, scrapbook

Introduction: My name is Tish Haag, I am a excited, delightful, curious, beautiful, agreeable, enchanting, fancy person who loves writing and wants to share my knowledge and understanding with you.