Also known as:special needs trust · special-needs trust · special-needs trusts · SNT · supplemental needs trust
Written by attorneys — see sources below.
A trust created to supply supplemental goods and services to a disabled beneficiary while preserving eligibility for means-tested public benefits such as Medicaid and SSI. The trust typically directs any remaining assets to the state upon the beneficiary's death up to the amount of benefits received. Courts may authorize conversion of an outright remainder into such a trust when unanticipated circumstances arise and the change better advances the settlor's purposes.
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How its tested
Common Examples
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Court Converts Remainder to Preserve Benefits
Simon Stern created a trust directing outright distribution of rental properties to his son Scott Summers after the life tenant's death. Years later Scott suffered a severe brain injury and began receiving long-term disability benefits. The trustee petitioned the court to convert the remainder into a special needs trust that would hold the properties and distribute income for Scott's supplemental needs. The court granted the petition because the injury was unanticipated and the conversion preserved assets while advancing the settlor's goal of lifetime support.
Trust Supplies Extras Without Losing Public Aid
Selena Singh established a special needs trust for her disabled nephew Seth Shapiro using settlement proceeds from a malpractice suit. The trust paid for therapies and home modifications not covered by Medicaid. Upon Seth's death the trustee distributed remaining funds first to the state to reimburse Medicaid payments. Seth continued receiving SSI and Medicaid because the trust assets were not counted as his resources.
What is the primary purpose of a special needs trust?
The trust supplies goods and services beyond basic public assistance without disqualifying the beneficiary from Medicaid or SSI. It also directs remaining assets to the state upon death to reimburse benefits paid.
Supporting sources
When may a court convert an outright remainder into a special needs trust?
A court may authorize the conversion under expanded equitable deviation when circumstances the settlor did not anticipate arise and the change better fulfills the trust's purposes. The modification alters the form of the beneficial interest but preserves the economic benefit for the disabled remainder beneficiary.
Supporting sources
Does conversion of a remainder into a special needs trust require unanimous beneficiary consent?
No. Equitable deviation permits modification over objection by contingent beneficiaries when unanticipated circumstances exist and the change advances the settlor's core purposes. Consent rules apply to other modification doctrines but not to deviation.
Supporting sources
Trusts and Estates Trusts and Future InterestsTrusts · ModificationUBEFoundational