It is estimated that one in ten families has a family member who has special needs and is receiving some form of Governmental assistance. Some programs are:

SSI- Supplemental Security Income

SSDI- Social Security Disability Income

Medicare- Medical coverage for seniors or disabled

Medicaid- Mass Health

Food Stamps

Section 8 housing

SSI, Medicaid, Food Stamps and Section 8 are eligibility programs. This means there are limits as to the amount of assets, income and gifts which a recipient can own or receive and maintain coverage.

SSDI, Medicare are based on inability to engage in gainful work for a period expected to last more than one year. These programs do not have asset or income limits. As such disabled individuals receiving SSDI or Medicare may not need a SNT. However, some individuals receive both SSI and SSDI along with Medicare and Medicaid. For these individuals, special planning is needed under an SNT.

Also a child who was determined to be disabled prior to age 18, can be eligible under his/her parent social security earnings for SSDI.

Special Needs Trusts are necessary to preserve the individual’s public benefits. Without proper planning, even a modest gift or inheritance directly to a disabled individual can jeopardize their continued eligibility and benefits.

There is a need for proper estate planning for parents, grandparents and relatives of such disabled individuals. They can transfer assets through living gifts or by Will to a SNT. This is known as a third party SNT.

Also, there is a need for planning for disabled individuals who have obtained a tort recovery, inheritance, insurance benefits, alimony or other gifts, so as to not disqualify the disabled individual from government benefits. This is known as a self settling SNT under OBRA 93.

Planning for an individual with mental retardation, autism, genetic disorders, brain injuries or mental illness requires special attention to protecting his/her eligibility for entitlement benefits. Special Needs Trusts, (SNT’s), are necessary to preserve the Beneficiary’s public benefits. An individual with a disability receiving SSI who accumulates more than $2,000.00 in cash resources may lose SSI and possibly Medicaid. As SSI only provides for the bare minimum, food, shelter and utilities, the Government established rules allowing assets to be held in Trust, as long as the Trust followed certain rules. These Trusts called Supplemental Needs or Special Needs Trusts (SNT) preserve

government benefit eligibility and leave assets that will meet the supplemental need of the person with a disability that go beyond food, shelter and utilities. The SNT can fund those additional needs.

With proper planning, families can set aside money for a disabled individual without jeopardizing benefits. Through a Special Needs Trust, families are able to:

-Secure quality of care – home improvements – household goods – special needs accommodations – personal assistants – Home care – handicap vehicle

-Enhance services- Dental benefits- eyeglasses – Non covered Medical

-Help maintain quality of life – School tuition – travel/vacations- entertainment – telephone, cable, computer costs

The rules by which the Trustee of a SNT must follow to preserve benefits are based on what type of public benefit the individual is receiving. The proper drafting and administration of a SNT is important.

There are two types of Special Needs Trusts.

The first is a Trust set up by a third party to hold funds gifted, by current gifts or by Last Will & Testament, for the disabled individual. These third party Trusts are not subject to Mass Health recovery and the remaining funds not used for the beneficiary can be re-designated free of the trust once the disabled individual passes away. Basically, the excess funds then pass to a named beneficiary or charity at the death of the disabled beneficiary. It is important that the disabled beneficiary not have any incidence of ownership of the Trust assets. Therefore, the Trustee powers are limited and cannot allow discretionary spending.

The second type is known as a self settled Special Needs Trust. This is usually set up by a Court appointed Guardian or through Court action. It is used when the disabled individual receives funds such as inheritance, alimony, insurance, personal injury settlement or other lump sums of money. In 1993, as part of the Omnibus Budget Reconciliation Act, (OBRA-93), Congress created a safe harbor for the use of Special Needs Trusts in these situations. These SNT’s are subject to state recovery of remaining funds in the Trust when the disabled individual passes away.

Self Settled Special Needs Trusts must meet specific criteria:

1) The disabled individual must be under 65 year of age.

2) The beneficiary must be disabled as defined in the Social Security Act

3) Trust is for the benefit of the disabled individual

4) The Trust can be established by a parent, grandparent, legal

Guardian of the individual or a Court

5) The Trust must contain a payback provision to State Medicaid Agency up to the amount equal to the total that the medical assistance paid.

6) The Trust must be irrevocable.

SNT’s are also subject to Rules of Administration. These rules apply to both Third Party Special Needs Trusts and Self Settled SNTs. Improper administration can jeopardize benefits. An SNT cannot distribute funds for:



-Real Estate taxes

-Homeowners Insurance


-Garbage removal


-Cash to Disabled Beneficiary

Special Needs Trusts are a very complex planning tool. The consequences of a poorly drafted trust can be severe, termination of needed benefits. It is recommended that you seek a qualified professional to draft a SNT Trust and in assisting the Trustee to administer the Trust.

The Law Office of Paul Kolesnikovas has experience in the drafting and administration of Special Needs Trusts. If you have any questions, please contact our office at 508-248-4696 or e-mail me at Paul@charltonlegal.com