A special needs trust, also called a Supplemental Needs Trust, is created for a person who is disabled and provides financial support. This is necessary because individuals who receive means-tested government benefits have assets and income limits set by government agencies, says a recent article, “The right special needs trust can help ensure a loved one’s financial stability” from Florida Today.
By setting up a special needs trust, these limits can be avoided, and a parent can ensure that their loved one has a better quality of life, during and after the parent’s own lifetime. 
An estate planning attorney can help determine the best trust type in this situation. It’s also important to track how money from the trust is spent and follow legal guidelines.
A benefit of having an SNT is that it protects a special needs individual from financial abuse, since the trustee is the only person with access to the funds. For this reason, choosing a trustee who is responsible, financially savvy and of the highest integrity is very important.
The most commonly used trust is a Third-Party SNT. The distinction is that the trust is funded by someone other than the beneficiary, such as a parent or other family members. There are two types of third-party SNTs—a “standalone” trust and a “testamentary” trust. The standalone trust may be accessed during the funder’s lifetime. The testamentary trust is funded by an estate when the funder passes and is part of their will.
There is also a first-party trust funded by the beneficiary. This is helpful when the individual acquires a large sum of money. The money may be placed in the trust and used as it would be for any special needs trust. A key difference: a Medicaid Repayment Provision usually needs to be put into place as part of the trust, so Medicaid may be reimbursed when the beneficiary dies.
Lastly, the pooled trust is another commonly used special needs trust. It combines the trusts of more than one beneficiary and can be a first or third-party funded trust. It must be set up and run by a nonprofit organization, which can benefit a loved one of a person with special needs by the nonprofit handling the trust. The nonprofit acts as the trustee, administers the funds, makes investments, and ensures that tax obligations are met.
An estate planning attorney will provide you with the options for your unique situation. Parents are wise to put a comprehensive plan in place to protect their special needs family members for the future.
Reference: Florida Today (April 8, 2023) “The right special needs trust can help ensure a loved one’s financial stability”