A Special Needs Trust (a/k/a Supplemental Needs Trust) is set up to ensure that a disabled individual receives benefits, such as Supplemental Security Income and Medicaid, while also enjoying extras that provide for a good quality of life.
A Third Party Special Needs Trust is funded by a friend or family member’s assets. A Self-Settled Special Needs Trust is funded by the disabled person’s assets.
The disabled person is always the beneficiary and is never the trustee of the Special Needs Trust (SNT). In practice, the way a SNT works is the beneficiary asks the Trustee to make a distribution. If the Trustee feels the distribution is allowed under the terms of the SNT and it is in the best interest of the beneficiary, the trustee pays for the goods or services directly from the trust account. The Trustee can also determine on his own that the beneficiary is in need of or would enjoy an allowed good or service. The money never passes through the beneficiary’s hands. This is important because any money the beneficiary controls may reduce his Supplemental Security Income or may cause a loss of Medicaid benefits.
Consult your estate planning attorney for further information.