Special Needs Trust Law and Legal Definition

A “special needs trust” may be set up to provide for a disabled child’s or adult's extra and supplemental needs, other than basic food, shelter and health care expenses that may be covered by public assistance benefits that the beneficiary may be entitled to receive under various programs such as Supplemental Security Income (“SSI”) and Medicaid.

The special needs trust is primarily governed by federal law under 42 U.S.C. § 1396p (d) (4), which permits the use of special needs trusts, making them valid throughout the country.

Generally, the designated trustee is given broad discretionary powers to distribute income and principal to or for the child’s or adult's benefit. Terms vary by agreement, but the trustee may have sole and absolute discretion over payments of income and principal in order to maximize your child’s eligibility for public assistance benefits under current law. The trust may also allow the trustee to terminate the trust if it is possible that your ward may in the future become sufficiently competent to manage his or her own assets. The special needs trust must be carefully drafted to comply with Medicaid and SSI rules in order to preserve the ward's eligibility for Medicaid, SSI and other governmental programs.