What is a Special (Supplemental) Needs Trust and Why is it Advisable?

In the State of Maryland, and Federal Law parents of a special needs child can set up a Supplemental (or a Special Needs) trust for their children which will not disqualify them from government benefits, such as Social Security and Medicaid. Unfortunately, prior to this protection, parents would simply disinherit their disabled children rather than see their hard earned savings be squandered to the state. Now, the child receives money from the trust for their extra needs i.e. what the state does not supply, such as vacations; special equipment; medical help that the state does not provide or supply, glasses, dentures, hearing aids; over-the-counter medicines; upgraded medical procedures; recreation; improved housing; etc.

However, any payments made directly to the child may reduce their SSI payments dollar for dollar. Therefore, the trustees of such trusts should make any payments directly to the providers of goods and services. Preserving SSI benefits is crucial. Because SSI eligibility equals Medicaid eligibility.

Why is the supplemental needs trust advisable? Some parents leave the inheritance to a brother or sister who will then, hopefully, take care of their disabled sibling. However, there is no guarantee this will occur, no matter the child’s assurances. Therefore, there’s no protection to the disabled child if the sibling has financial difficulties, a divorce or predeceases the disabled child. Consequently, the supplemental needs trust allows the sibling, as a trustee, to manage the trust assets for the benefit of the disabled child. Therefore, providing complete protection for the special needs child.