The Role of a Special Needs Trust in Disability Planning
Author: Ian C. Langtree - Writer/Editor for Disabled World (DW)
Published: 2010/11/28 - Updated: 2026/05/17
Publication Type: Informative
Contents: Synopsis - Definition - Introduction - Main - Insights, Updates - Related Publications
Synopsis: This information outlines how a special needs trust, sometimes called a supplemental needs trust, can be used to provide for the long-term care of a person with a disability without disrupting eligibility for means-tested government benefits such as Supplemental Security Income (SSI) and Medicaid. The article explains why a sudden increase in personal assets - for example, from a personal injury settlement or an inheritance - can jeopardize those benefits and walks through the two most common trust structures: OBRA trusts, funded with assets that belong to the individual with a disability, and third-party trusts, funded with assets from family members or other loved ones. It also describes how trust funds can be used to pay for supplemental needs above and beyond what government programs cover, such as accessibility modifications to a home, and emphasizes the importance of careful drafting by a qualified attorney. The information is useful for people with disabilities, parents and family members planning for a loved one's future, personal injury claimants, and seniors thinking through estate planning.
- Topic Definition: Special Needs Trust (SNT)
A special needs trust, also known as a supplemental needs trust, is a legal arrangement that holds assets for the benefit of a person with a disability in a way that does not count those assets toward the financial eligibility limits of means-tested government programs such as Supplemental Security Income and Medicaid. The trust is managed by a trustee who uses the funds to pay for goods and services that supplement rather than replace public benefits, such as therapies not covered by insurance, assistive technology, accessible home modifications, transportation, education, and recreation. Common forms include first-party or OBRA trusts, funded with the disabled individual's own assets from sources like a legal settlement or inheritance, and third-party trusts, funded by parents, grandparents, or other relatives as part of an estate plan.
Introduction
For many who are unable to work because of severe disabilities, government programs such as Supplemental Security Income and Medicaid provide critical benefits. These programs ensure access to health care and offer limited financial support for basic needs.
Main Content
However, these are means-tested benefits programs, meaning that the benefits are only available to those with demonstrated financial need. Significant income or an increase in personal assets from any source may pose a threat to eligibility. This can pose a challenge when a disabled person receives substantial assets in a lump sum, as may be the case with a personal injury lawsuit or an inheritance.
To avoid affecting benefits eligibility, it is important to ensure that any transfer of assets is properly structured. In many cases, establishing a special needs trust, also known as a supplemental needs trust, may be the most effective way to provide for the long-term care of a disabled person without undermining benefits eligibility.
There are two common types of special needs trusts:
OBRA trusts and third-party trusts. The appropriate type of trust depends on the original source of the assets.
- OBRA Trusts: To create an OBRA trust, the trust assets must come from the individual. For example, these assets may come from a legal settlement following a serious accident or from an inheritance.
- Third-Party Trusts: Third-party trusts are generally created with assets provided by family members or other loved ones.
In either case, the funds must be used for the benefit of the disabled person. Essentially, these trusts pay for supplemental care, above and beyond that which is provided by the government. For example, assets from a special needs trust may be used to modify a home if necessary for accessibility purposes.
These trusts must be carefully drafted to effectuate the intended purpose and to avoid conflicts with otherwise available benefits.
For more information regarding special needs trusts and the role these trusts can play in providing for a loved one, speak with a knowledgeable attorney who has experience handling trusts and estate planning.
Insights, Analysis, and Developments
Editorial Note: A well-drafted special needs trust can be one of the most powerful tools available to families who want to leave money or property to a disabled loved one without pushing them off the very benefits that keep their health care and housing in place. Because the rules around SSI, Medicaid, and trust funding are technical and change over time, working with an attorney who specializes in elder law or special needs planning is well worth the investment, particularly when a lump sum from a settlement or inheritance is on the horizon.
Author Credentials: Ian is the founder and Editor-in-Chief of Disabled World, a leading resource for news and information on disability issues. With a global perspective shaped by years of travel and lived experience, Ian is a committed proponent of the Social Model of Disability-a transformative framework developed by disabled activists in the 1970s that emphasizes dismantling societal barriers rather than focusing solely on individual impairments. His work reflects a deep commitment to disability rights, accessibility, and social inclusion. To learn more about Ian's background, expertise, and accomplishments, visit his full biography.