What is a special needs trust?
A special needs trust (SNT) holds assets for a person with a disability without disqualifying them from means-tested public benefits like SSI and Medicaid. Because the trustee controls distributions and the beneficiary cannot demand funds, the trust assets are not counted against the $2,000 SSI resource limit.
Will an inheritance stop SSI or Medicaid?
A direct inheritance above the $2,000 countable-resource limit will typically suspend SSI and can end Medicaid eligibility until the assets are spent down. Directing the inheritance into a third-party special needs trust avoids this because trust assets are not countable resources.
What is the difference between a first-party and third-party SNT?
A first-party (d4A) SNT is funded with the beneficiary's own money (such as a lawsuit settlement) and must include a Medicaid payback provision at death. A third-party SNT is funded by someone else (parents, grandparents) and has no payback requirement, so remaining funds can pass to other family members.
Who should be trustee of a special needs trust?
A reliable individual, a professional fiduciary, or a pooled-trust organization. The trustee must understand SSI and Medicaid rules because improper distributions (like cash paid directly to the beneficiary) can reduce or eliminate benefits.