Special Needs Trusts and Supplemental Needs Trusts share the same goals but are structured differently; knowing the difference and following the proper rules can be the difference between Medicaid eligibility and denial.
Special Needs Trusts vs. Supplemental Needs Trusts: Key Differences
Although special needs trusts and supplemental needs trusts share the same overall goal, several differences could affect which one is appropriate for your loved one. Here are five important distinctions:
- Who Funds the Trust
- A first-party SNT (traditional special needs trust) is funded with the beneficiary’s own assets, such as a legal settlement or inheritance.
- A third-party SNT, commonly referred to as a supplemental needs trust, is funded by someone else—usually a family member.
- Age Limitations
- First-party SNTs must be established and funded before the beneficiary turns 65. After this age, additional contributions are not allowed.
- Supplemental needs trusts do not have age restrictions for establishing or funding.
- Medicaid Payback Requirement
- Upon the beneficiary’s death, any remaining assets in a first-party SNT must be used to reimburse the government for medical expenses paid through Medicaid.
- There is no reimbursement requirement with a supplemental needs trust.
- Eligibility Requirements
- A first-party SNT beneficiary must have a disability recognized by the Social Security Administration (SSA).
- Some states impose the same requirement for supplemental needs trusts, while others may have more flexible standards—your estate planning attorney can provide guidance based on your location.
- Legal Complexity and Risk of Mistakes
- Misunderstanding the differences between trust types can lead to costly errors. Working with an experienced attorney ensures proper structure, compliance with laws, and protection of the beneficiary’s interests.
Navigating the Complexities of Special Needs Trusts
Special needs trusts offer a valuable solution for individuals with disabilities to hold and manage assets without endangering their public benefits. However, these trusts can be legally complex, and drafting them correctly is crucial.
At EEPLF, our attorneys specialize in creating and maintaining special needs trusts tailored to each family’s unique circumstances. We ensure your trust is not only legally sound but also flexible enough to adapt to the beneficiary’s evolving needs over time.
If you’re considering a special needs trust or need help reviewing your estate plan, contact our team today. We’re here to help you make informed decisions that secure a better future for your loved one.
These legal topics are provided to you by the President of QMC, Mark Easley. While QMC does not engage in the practice of law, Mr. Easley has practiced estate planning and elder law for over 30 years and is currently the principal at the Elder and Estate Planning Law Firm of St. Louis.