Types of Special Needs Trusts
- First-Party SNT: Funded with the beneficiary’s own assets (inheritance, settlements). Requires a “Medicaid pay-back” clause on termination.
- Third-Party SNT: Funded by family members or others. No pay-back requirement, so leftover assets can pass to heirs.
- Pooled Trust: Managed by a nonprofit. Each beneficiary has a separate account but pooled administration reduces fees.
Key Benefits
- Preserves eligibility for SSI & Medicaid.
- Trustee controls distributions for housing, education, travel, therapy, recreation.
- Flexible long-term vehicle that complements other tools (ABLE accounts, life insurance).
Setting One Up
- Identify the right trust type based on funding source and goals.
- Choose a trustee who can manage distributions prudently.
- Draft the trust document with required language (Medicaid pay-back, discretionary powers).
- Coordinate with an elder-law or special needs attorney in your state.
- Review periodically to ensure compliance with changing benefit rules.