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What is a Special Needs Trust?

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.

Why a Special Needs Trust?

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.

Special Needs Trusts Spending Rules Are Specific

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.

Main Types of Special Needs Trusts

There are two main types of special needs trusts: first-party and third-party


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.

Moors & Cabot, Inc - Johnson Cotroneo Group

999 Vanderbilt Beach Rd. Suite 102

Naples FL, 34108

239-449-7982, 239-449-7992

Investment Advisory Services provided by Johnson Cotroneo Group are through Moors and Cabot, Inc., an SEC-registered investment advisor.

Brokerage services and investment products offered through affiliated broker-dealer Moors and Cabot, Inc., Member FINRA, SIPC

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