Helps provide for the needs of a special needs beneficiary without jeopardizing eligibility for government benefits (Medicaid/SSI)

Most states have set a $2,000 asset limit for Medicaid eligibility

States only count income and assets legally available to the applicant. A special needs trust restricts the beneficiary’s access to the assets such that they are not considered legally available

Inheriting money could make an individual ineligible for SSI. By naming a special needs trust as your beneficiary instead of your child, however, assets can be devoted to the care of your loved one

Third-party special needs trust

• Established with funds that belong to someone other than the beneficiary (parent, grandparent). Upon the death of the beneficiary, any assets that remain in the trust can be distributed to whomever has been designated; if the third-party trust is properly drafted, the state will not have to be "paid back" for long-term care services when the beneficiary dies

• If created during the grantor’s lifetime, the trust can either be a grantor (grantor pays tax) or a non-grantor trust (trust pays tax)

Self-settled trust

• Established with the funds owned by the special needs beneficiary. Upon the beneficiary's death, Medicaid must be "paid back" from the trust assets for any long-term care provided

• Typically considered a grantor trust and income is taxed to the special needs beneficiary