Planning for a loved one with special needs requires more than just good intentions—it requires thoughtful, strategic action. Leaving assets directly to a special needs beneficiary, even with the best of intentions, can unintentionally jeopardize their eligibility for essential government benefits like Medicaid or Supplemental Security Income (SSI). That’s where a Special Needs Trust (SNT) comes in.

This powerful estate planning tool allows you to provide long-term financial support for your loved one without compromising their access to critical public assistance programs. A SNT can be created within a trust or a will, which will not become funded until after the death of the person who created the plan, or, a trust can be created and funded during one’s lifetime.

But what if YOU are the person with special needs? What happens when an estate plan was not created with a special needs beneficiary in mind? What if there is no plan at all?

(Spoiler: I handle special needs trusts for both first and third parties, which most attorneys don’t do–but more on that later.)

There are two types of Special Needs Trusts–the Third Party Trust, which is created for the benefit of someone else, and First Party Trusts (sometimes called self-settled special needs trusts), which are created by the person with special needs, using their own assets.

 

The First Party SNT in Rhode Island

This type of trust is funded with the assets or inheritance of the person with special needs. It is often used when the individual unexpectedly comes into money, like receiving an inheritance or a settlement from a lawsuit, so that they do not lose Medicaid or SSI benefits.

In order to create a SNT for yourself,

you must be under 65 years of age,

have a qualifying disability and the trust must be funded with our own assets.

If you are over age 65,

you may qualify for a pooled special needs trust.

You cannot be the trustee of your SNT. You must name someone who will manage the trust assets on your behalf.

 

Medicaid CLAWBACK provision 

A First Party SNT is subject to Medicaid payback provisions, meaning that any funds remaining in the trust upon the beneficiary’s passing must be used to reimburse the government for Medicaid expenses incurred during their lifetime

 

The Third-Party SNT in Rhode Island

Family members or loved ones establish this type of trust for the benefit of the person with special needs. It is commonly used to provide for the individual’s supplementary needs, such as education, transportation, and recreation. Unlike first-party trusts, there are no Medicaid payback provisions, so any remaining funds can be distributed to other heirs or charities after the beneficiary’s passing

Not Every Estate Planning Attorney Drafts First-Party Special Needs Trusts—Here’s Why

First Party SNTs did not exist until December 2016, when Congress passed the 21st Century CARES Act. Before this law was enacted, people with disabilities would often lose eligibility for government benefits due to the very low asset threshold. Thus, even attorneys with many years experience in estate planning may not have had the opportunity to create this type of special needs trusts.

Many attorneys choose not to draft first party special needs trusts because of the strict and complex legal requirements involved. Because first party special needs trusts are funded with the beneficiary’s own assets (usually from a personal injury settlement or inheritance) they must meet specific federal and state guidelines to preserve eligibility for needs-based benefits like Medicaid and SSI. In addition to being irrevocable and including the  Medicaid payback provision, First Party SNT are often subject to court approval and ongoing court supervision, depending on the jurisdiction.

Because even small errors in drafting or administration can result in loss of benefits or legal complications, many attorneys without specialized experience in public benefits or elder law choose to refer this work to attorneys who regularly handle such trusts.  I do this work myself, so I’m the type of attorney others are referring to. So if you’re reading this and you’re considering working with me, know that you’re in good hands.

 

Work With An Experienced Special Needs Trust Attorney

Our firm has experience creating First Party Special Needs Trusts that protect our clients’ much-needed government benefits, such as SSI and Medicaid. Because these trusts are available, clients can still benefit from their assets and continue to receive benefits. If you or a loved one would benefit from a SNT, click below to give me a call.