Special Needs Planning FAQs

A special needs trust (SNT), sometimes called a supplemental needs trust, allows you to leave money or property to someone with disabilities without disqualifying them from public benefits such as Medicaid or Supplemental Security Income (SSI).

These trusts are designed to supplement basic benefits rather than replace them. While SSI and Medicaid cover necessities such as food and shelter, an SNT can pay for things that enhance the beneficiary’s comfort and independence, such as transportation, education, recreation, and out-of-pocket medical costs.

Any third party can create a special needs trust for a person with disabilities. Parents often do so for their children, but grandparents, siblings, or friends can also establish one. In some cases, a person with disabilities may set up their own “first-party” trust using their own funds, such as from a lawsuit settlement.

Because these trusts must meet strict federal and state requirements, working with an attorney experienced in Florida special needs planning helps ensure the trust is structured correctly and that it will hold up to government review.

A special needs trust can be created at any time, but early planning offers the most flexibility and protection. Parents or loved ones often establish a third-party special needs trust during their own estate planning so it’s ready to receive inheritances, gifts, or life insurance proceeds.

For first-party special needs trusts, which are funded with the beneficiary’s own assets (such as a legal settlement or inheritance received directly), the trust must generally be established before the beneficiary turns 65 to comply with federal requirements.

Creating the trust in advance ensures funds can be transferred promptly when needed without interrupting eligibility for important benefits like Medicaid or SSI.

Trustees can use funds to pay for qualifying distributions that improve the beneficiary’s quality of life. Examples include:

• Home furnishings and personal items
• Medical and dental care not covered by Medicaid
• Therapy, assistive technology, and mobility aids
• Education and job training
• Transportation, including adapted vehicles
• Vacations, hobbies, and social outings

However, the trust should avoid paying directly for food, rent, or utilities, as these may reduce SSI benefits. Instead, trustees can pay service providers or vendors directly, ensuring funds are used for the beneficiary’s benefit without affecting eligibility.”

Distributions are made at the trustee’s discretion, following the trust’s terms and the beneficiary’s needs. During the beneficiary’s lifetime, funds are used to enhance well-being. When the beneficiary passes away, the remaining assets are distributed according to the trust type:

• First-party SNTs may require repayment to Medicaid for benefits provided.
• Third-party SNTs can distribute remaining assets to other family members or charities without reimbursement obligations.

Proper planning ensures that your family’s intent for the remaining assets is honored while maintaining compliance with Florida and federal rules.

Yes. A special needs trust can hold title to a home, vehicle, or other property for the beneficiary’s use. The trustee must ensure ownership and expenses are handled properly to avoid affecting benefits. The trust can pay for maintenance, taxes, and insurance directly, not as cash to the beneficiary.

If a trustee fails to follow the trust’s terms or misuses funds, they can be removed or held personally responsible. Family members or interested parties may petition the court to review the trustee’s conduct and appoint a replacement to protect the beneficiary’s interests and preserve the trust’s assets.

Selecting a trustee is one of the most important decisions in special needs planning. The trustee will manage investments, handle recordkeeping, and decide when and how to make distributions. Consider the following when choosing a trustee:

• Trustworthiness and availability: The trustee must act in the beneficiary’s best interests and be able to manage the trust responsibly.
• Financial management skills: A trustee should understand budgeting, taxes, and government benefit rules.
• Personal knowledge of the beneficiary: Familiarity with the individual’s needs can lead to better decisions.
• Professional or corporate trustees: In complex situations, appointing a professional trustee can help ensure compliance and continuity.

We often recommend appointing a co-trustee or successor trustee to provide checks and balances and ensure long-term stability.

Even high-net-worth families benefit from creating a special needs trust. Without one, assets left directly to a person with disabilities could jeopardize public benefits or expose those funds to creditors.

A properly structured SNT offers:

• Protection from lawsuits and creditors
• Controlled management of distributions
• Continued eligibility for government benefits
• Confidence knowing funds will be used as intended

Yes. A comprehensive special needs plan can include several tools in addition to a trust. Families often coordinate:

• ABLE accounts, which allow individuals with disabilities to save and spend money for qualified expenses without losing SSI or Medicaid.
• Guardianship or supported decision-making arrangements to ensure proper legal authority over personal and financial matters.
• Letters of intent, which document the beneficiary’s daily needs, preferences, and care instructions for future caregivers or trustees.
• Care management plans, which outline housing, healthcare, and long-term support resources.

A special needs trust works best when it’s part of a broader plan that integrates these tools to promote long-term stability and independence.