Special Needs Trust

A trust that holds money for a person with a disability without disqualifying them from SSI and Medicaid, the difference between first-party and third-party trusts, and the ABLE account alternative.

Looking for a lawyer rather than a definition? Skip to the state-by-state list of Trusts law firms.

What it means

Supplemental Security Income and Medicaid are means-tested: a person with more than a small amount of countable resources loses eligibility. An inheritance, a lawsuit recovery or a gift left directly to a person with a disability can therefore cost them the benefits they depend on, often including the Medicaid coverage that pays for long-term services. A special needs trust (also called a supplemental needs trust) holds the money instead, managed by a trustee, so it is not counted as the beneficiary's resource while still being used for their benefit.

There are two basic kinds. A third-party trust is funded with someone else's money, typically parents or grandparents through their wills, living trusts or beneficiary designations; when the beneficiary dies, what remains passes to whoever the trust names. A first-party (self-settled) trust holds the disabled person's own money, such as a personal injury settlement or back benefits. Federal law allows it only for a person under 65, established by the person, a parent, grandparent, guardian or court, and it must repay the state Medicaid program from what remains at death. A pooled trust run by a nonprofit is a further option for first-party funds, with separate accounts managed together.

How the trustee spends the money matters as much as how the trust is written. Distributions paid directly to providers for things such as medical care not covered by Medicaid, education, therapy, equipment, travel and recreation generally do not reduce benefits; cash given to the beneficiary does, and payments toward housing can reduce SSI. An ABLE account is a simpler tax-advantaged alternative for a person whose disability began before an age limit set by statute (raised by Congress for 2026): the beneficiary can control it, and it can pay housing costs, but contributions are capped each year. Many families use both. See also SSI and living trusts.

Where this comes from

When people hire a lawyer for this

Use a lawyer who drafts special needs trusts regularly (often an elder law or special needs planning attorney): a trust missing the required terms, or a settlement paid to the beneficiary before the trust exists, can cost eligibility that takes months to restore. Parents should also update their wills and beneficiary designations so nothing passes to the child outright. If a lawsuit settlement is involved, have the trust lawyer and the injury lawyer coordinate before the settlement is signed.

Worried about the cost? A lawyer can be hired for one part of a case only (limited-scope representation), may be paid from what a claim recovers (contingency fee), or may be free through a pro bono program or legal aid; a court can also waive its own filing fees.

Find Trusts law firms in your state

Choose your state to see Trusts law firms in the city where we list the most; your city may be under “other cities”, A to Z. A state marked “Estate Planning” has no Trusts listing yet and opens the broader page.

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  • and 7 more with fewer listed firms
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Related terms

Entries on the same subject:

• Revocable Living TrustA container you put property into during life so it can pass at death without a court - useful, oversold, and useless if left unfunded.
• Successor Trustee DutiesWhat a person named to take over a living trust after the creator dies or becomes incapacitated must do, the duties the law imposes, and when a trustee can be personally liable.

Other entries in the same area of law, each written from the same primary sources.

• Beneficiary Designation (Payable-on-Death)The single line on an account form that overrides the will - and the commonest reason an estate plan does not do what the family expected.
• Contesting a WillThe narrow legal grounds for setting a will aside - and why "it is not fair" is not one of them.
• Elder LawThe practice area that brings together the legal problems of aging: paying for long-term care, Medicaid eligibility, planning for incapacity, guardianship, and protection from abuse and financial exploitation.
• Estate Planning (What an Estate Plan Is Made Of)The set of documents and arrangements that decide who manages your affairs if you cannot, who inherits what, and how, with the least cost, delay and tax.
• Executor (Personal Representative)The person a court authorizes to wind up an estate - a job with real duties, real personal exposure, and a right to be paid.
• Guardianship and ConservatorshipA court transferring legal decision-making for an adult who cannot make decisions themselves - the most restrictive option, and often not the necessary one.
• Intestate SuccessionThe statutory order in which a person's property passes when they die without a valid will - a default set by the state, not by the family.
• Last Will and TestamentThe document that says who inherits what - and, just as importantly, the many things it does not control.
• Power of AttorneyA document authorizing someone to act on another person's behalf in financial or legal matters.
• ProbateThe court process that settles a deceased person's estate: validating any will, paying debts, and transferring what remains.
• Small Estate AffidavitThe sworn form that lets a family collect a modest estate without opening a probate case at all.
• Spousal Elective ShareThe statutory right of a surviving spouse to claim a portion of the estate regardless of what the will says.

« All glossary terms