Special Needs Trusts for Disabled Children


Recent studies indicate that about 5.2% of American children between the age of 5 and 17 have some sort of disability, a total of about 2.8 million children. While some children will–with the aid of special education programs during childhood and early adulthood–be able to live independent lives, many will always need some degree of financial assistance in order to live a comfortable and stress-free life.

The parents of such children likely understand that they will have to establish some sort of long-term financial support for their disabled children. However, many overlook the fact that if financial support is not provided in a careful manner, their children may not be eligible to receive support from government programs such as Medicaid and SSI (Supplemental Security Income). Essentially, leaving your disabled a lump sum of cash, investment funds, or valuable real property would make them financially ineligible for such programs.

Very few people have the funds necessary to fully pay for their children’s lifelong medical and financial needs. So it is imperative that the parents of disabled children work with a lawyer who not only has experience with trusts, but a specific financial instrument known as a ‘special needs trust.’

What are special needs trusts?

A special needs trusts, sometimes referred to as a supplemental needs trust, is a trust designed to distribute funds to a disabled child on a structured basis so that the child has the funds necessary to meet their needs, without jeopardizing their access to governmental relief.

Just about any type of property with financial value can be placed into a special needs trust, including investments, businesses, real property, and stocks. However, the purpose of a special needs trust is to distribute cash funds to the beneficiary. This means that someone, such as a trusted family member or friend, must be designated as a trustee, giving them the ability to sell property in the trust in order to generate needed funds.

However, it’s important to note that these funds can’t simply be given to a child as they wish. The funds from a financial trust can only be spent on certain things.

What can the money from a special needs trust be used for?

As we mentioned, having free access to too much money can trigger a reduction or complete cessation in benefits such as Medicaid, SSI, subsidized housing, and vocational rehabilitation. This means that the money from a special needs trust must be spent carefully, and only on certain things, such as:

  • Paying for the cost of care attendants not covered by programs such as Medicaid;
  • Necessary home furnishings and personal items, such as clothing, furniture, and computers;
  • Utilities and services such as cable, cell phone service, Internet, and housekeeping;
  • Medical and dental expenses not covered by insurance or other benefits;
  • Food, items, and veterinary care for pets;
  • Educational programs;
  • Paying for transportation and vehicle maintenance;
  • Certain special events such as vacations, recreation, and travel.

Given the relatively large range of items that trust funds can be used for, it can come as a shock that such funds often not be used to pay for critical items such as food and housing. However, this is because spending money on such items can result in a reduction of benefits. But depending on the circumstances, it may prove to be worthwhile to accept these tradeoffs in certain situations, or when exceptions allow for such expenditures.

The above should make it clear that planning for the needs of a disabled loved one is an extremely complex endeavor, and requires a great deal of knowledge about the laws that govern access to aid programs. This is complicated by the fact that a disabled child may live for many decades after the death of their parents, necessitating that a trust be carefully utilized and governed in order to ensure that the funds last for the lifespan of the child.

This is why it’s critical to consult with an experienced special needs trust lawyer, such one of those at Toeppen & Grevious. If you’re ready to start preparing for the lifelong needs for your disabled child, but you’re not sure where to start, call us at 916-400-4516, or contact us using the “Get In Touch” form on this page, so that we can schedule a consultation with you.