This person is called the “beneficiary.” Assets held by a Supplemental Needs Trust are not considered “available assets” to the beneficiary. As a result, the money and goods held by the trust may be used for the beneficiary and he or she will still be eligible for benefits such as Social Security and Medical Assistance. These benefits are necessary for the future of a child or adult who has a disability because they are usually necessary for healthcare coverage as well as housing and vocational supports.

Once you have established a Supplemental Needs Trust, other people who want to leave a gift for your child who has a disability can also designate the Trustee of the Supplemental Needs Trust as a beneficiary. In fact, you will want to tell others such as grandparents that they can create many problems by leaving an inheritance directly to a child who has a disability.

If there are assets left in the trust when the beneficiary dies, then the terms of the trust explain how those assets should be distributed. Often, this means that siblings or other family members will receive remaining assets. Failure to plan ahead may result in left-over assets going to the government rather than family members.

A Special Needs Trust serves the same purpose as a Supplemental Needs Trust but there are some important differences.

A Special Needs Trust is necessary when the individual who has a disability has money or other assets in their own name. For example, if a parent or grandparent dies and leaves $30,000 to a grandchild who has a disability, that money has to go into a Special Needs Trust rather than a Supplemental Needs Trust to maintain eligibility for Medical Assistance or Social Security.

One disadvantage of a Special Needs Trust is that the government has a claim on the assets of the trust. This means that any money left in the trust upon the death of the beneficiary usually goes to the government rather than other family members. Another disadvantage is that a Special Needs Trust may need court approval if not established by a parent or grandparent before they die. This results in increased expenses. As always, planning ahead is less expensive!