Special Needs Planning

Guest Post: What is a Special Needs Trust?

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What is a Special Needs Trust?

Guest post courtesy of Steven D. Jaeger, Esq. of The Jaeger Firm, LLC

If a person with special needs has assets -- perhaps from a lawsuit award or settlement or from a gift or inheritance – those assets can disqualify the person from receiving essential public benefits like Medicaid and Supplemental Security Income (SSI).  A special needs trust can allow the person with special needs – the trust’s beneficiary -- to remain eligible for needs-based public benefits while at the same time preserving the assets to enhance the beneficiary’s quality of life.

Special needs trusts are intended to supplement, not replace, the kind of basic support that programs like Medicaid and SSI provide. Such trusts pay for anything the trust document provides for, including comforts and luxuries that meager public assistance funds don't cover -- hence the term “special needs.”  A special needs trust has been likened to a “parent's pocket” -- that is, it pays for the kinds of things that a parent would just reach into his or her pocket to cover. These trusts typically pay for amenities beyond the simple necessities of life, things like education, recreation, counseling, and medical attention. 

Funds held in a properly drafted special needs trust should not affect a Medicaid or SSI recipient’s benefits. But problems can develop when funds from a special needs trust are spent. Because the rules are very complicated, it is best to always sit down with your special needs planner to discuss what you intend to do with your trust before making any payments to anyone.

There are two main types of special needs trusts: first-party and third-party trusts.  First-party (or “self-settled”) trusts are used when the trust assets belong to the person with special needs, perhaps from an award or settlement.  Third-party trusts are generally used when a parent or guardian wishes to establish and fund a trust for the benefit of the person with special needs, usually a minor child.  A third kind of trust, a “pooled trust,” contains the funds of many people with special needs and may be appropriate for some people.

A qualified special needs planner can walk you through the pros and cons of each type of trust and help you to properly establish one.


Steven D. Jaeger, Esq., The Jaeger Firm, LLC

Steven D. Jaeger is a founding member of The Jaeger Firm, PLLC, located in Erlanger, Kentucky. Through unique personal circumstances, Steve understands first-hand the need to plan for long-term care and estate issues. Diagnosed with several life-altering auto-immune disorders, he’s dedicated his life to helping others understand the need for long-term planning, the importance of having a plan in place for one’s family, and the options available to people who are faced with life’s unexpected events. Steve is passionate about helping families and individuals create a plan to protect themselves, their families, and the assets they have worked their entire life to accumulate, while also preserving legacies and dignity during the aging process. 

X² Wealth Planning and Juncture Wealth Strategies are not affiliated with The Jaeger Firm, LLC. All information provided by the guest blogger has been provided as is and has not been reviewed or edited for accuracy.

Cover Photo by Nathan Anderson on Unsplash