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.

Special needs planning is designed to provide a secure and supportive future for individuals with disabilities, ensuring their needs are met long after their caregivers have passed. In this post, we will explore who benefits from special needs estate planning, when and why it is crucial and the compassionate foundation upon which it is built.

There’s two main types of special needs trusts—but this isn’t the subject of this blog. Special needs trusts should not be confused with asset protection or ”Spend Thrift” trusts (the type of trust set up to prevent a beneficiary from misusing trust funds, like spending it at the casino). Special needs trusts are designed specifically to supplement the needs of individuals living with disabilities.

Who Benefits from Special Needs Estate Planning?

Individuals with Disabilities

The primary beneficiaries of special needs estate planning are individuals with physical, intellectual or developmental disabilities. These plans are crafted to address specific needs. Offering financial support, healthcare provisions and quality of life enhancements tailored to their unique circumstances.

Families With Special Needs or Supplemental Needs Member

Parents, grandparents, guardians or other family members of individuals with special needs also benefit from these plans. Special needs estate planning provides peace of mind, knowing that their loved one will be cared for and financially supported when they are no longer able to prove assistance.

When is Special Needs Planning Needed?

Early Planning is Key

Special needs estate planning is most effective when initiated early in the individual’s life. Starting the planning process while the individual is still young allows for the accumulation of resources and the establishment of a comprehensive strategy. Special needs trusts can also be created to hold funds from personal injury lawsuit awards. It’s especially important to consider special needs estate planning if:

• Your loved one is receiving government benefits such as Supplemental Security Income (SSI) or Medicaid.
• You want to ensure that your loved one’s inheritance does not disqualify them from receiving government benefits.
• You want to appoint a trusted individual or organization to manage assets on behalf of your loved one.
• You want to create a plan for your loved one’s care and support after you’re no longer able to provide it yourself.

Life Transitions May Require You To Update Your Plan

Life events such as death of a caregiver or transitioning into adulthood may necessitate a review and adjustment of the special needs estate plan. It’s crucial to reassess and update the plan to reflect changing circumstances.

Why is Special Needs Planning Crucial?

Preserving Government Benefits

Individuals with special needs often rely on government assistance programs such as Supplemental Security Income (SSI) and Medicaid. These programs are “means tested,” meaning the recipient is subject to strict income and asset limits. Receiving a substantial inheritance will result in loss of benefits. Careful estate planning can help preserve eligibility for these crucial benefits.

Ensuring a Lifetime of Support

Special news estate planning provides a framework for ongoing care and support, covering various aspects such as housing, medical care, education and quality of life enhancements. This ensures a continuous and reliable support system throughout the individual’s lifetime.

Guardianship Considerations

Special needs estate plans often include provisions for appointing a guardian or trustee to make financial and healthcare decisions on behalf of the individual when the primary caregivers are no longer able to do so.

Working With An Experienced Special Needs Estate Planning Attorney Can Help

In the realm of estate planning, special needs estate planning stands out as a beacon of compassion, emphasizing the importance of ensuring a secure and fulfilling future for individual switch disabilities. By addressing the unique and challenging needs faced by these individuals, this form of planning provides a roadmap for a lifetime of care, support and dignity. If you have a family member with special needs, or you are an adult with a disability, consult with an experienced estate planning attorney to craft a plan that fits your unique situation. Schedule your appointment today by clicking the link below.