Special needs trusts protect access to vital public programs and allow families to plan for future costs not covered by benefits, including therapy, transportation, education, and recreational activities. Trusts can be tailored to the beneficiary’s medical needs and family wishes, helping reduce guardianship needs and offering continuity of care even as family circumstances change over time.
A well-drafted trust permits discretionary spending on education, therapies, enrichment activities, and adaptive equipment while keeping countable resources below program thresholds. By defining permissible expenses and distribution procedures, the trust enhances independence and wellbeing without disrupting access to essential public programs.
We focus on creating trust instruments that reflect family priorities while complying with Medicaid and SSI regulations. Our attorneys collaborate with caregivers and financial advisors to draft distribution standards, select trustees, and implement funding strategies that balance flexibility with benefit preservation.
We recommend scheduled reviews and are available to advise trustees on complex distribution questions or changes in eligibility standards. Keeping detailed records of expenditures and decisions protects beneficiaries and provides transparency in the event of audits or benefit reviews.
A special needs trust holds assets for a person with disabilities and is designed to supplement, not replace, public benefits. By placing funds in a properly drafted trust, distributions can pay for additional services and comforts while keeping the beneficiary’s countable resources below program limits. A trust must be tailored to benefit rules and include appropriate distribution standards and trustee duties. Regular coordination with benefits administrators and careful recordkeeping ensure the trust operates without jeopardizing eligibility. Families should consult counsel to choose the right trust type and draft provisions aligned with federal and Virginia statutes.
First-party trusts hold assets that belong to the beneficiary and often include a Medicaid payback provision, third-party trusts are funded by others and typically avoid payback, and pooled trusts are managed by nonprofits offering individual accounts within a pooled investment structure. The best option depends on funding source, family goals, desired flexibility, and the potential for Medicaid reimbursement. Legal and financial counsel can assess assets, program interactions, and long-term planning objectives to recommend the most appropriate structure and drafting approach.
If a beneficiary receives an inheritance or settlement, prompt action is essential to avoid a temporary or permanent loss of benefits. Transferring funds into a proper trust as soon as permitted under law, and coordinating with benefit administrators, prevents the funds from being counted as a resource. Documentation of transfers and the trust’s terms helps demonstrate compliance with program rules should reviews or audits occur. Families should contact counsel immediately to assess the best route and implement the trust quickly and correctly.
A trustee should be someone who can manage finances responsibly, communicate effectively with caregivers and agencies, and maintain meticulous records. Many families choose a trusted relative or a professional fiduciary as trustee, with successor trustees named in the event of incapacity or death. Duties include making permissible distributions, documenting expenditures, and filing any required accountings. Training and clear written guidance in the trust instrument reduce ambiguity and help trustees carry out their role consistently and lawfully.
Whether Medicaid requires reimbursement from trust assets depends on the trust type. First-party trusts often include a payback requirement at the beneficiary’s death to reimburse Medicaid for services paid. Third-party trusts typically avoid this obligation because they are funded by someone other than the beneficiary. Pooled trusts may have varying payback terms depending on the nonprofit administrator. Understanding these distinctions helps families structure assets to minimize government recovery where allowed and preserve legacy intentions.
Funding a trust effectively involves aligning wills, beneficiary designations, and account titling so assets move into the trust as intended. A pour-over will can direct probate assets into a trust, while changing life insurance or retirement account beneficiaries to the trust or a designated trustee ensures timely funding. Coordination prevents assets from ending up directly with the beneficiary and risking benefits; clear instructions and periodic reviews are essential to maintain consistency across documents and accounts.
Special needs trusts commonly cover housing-related costs, therapeutic treatments not paid by public programs, educational enrichment, assistive technology, transportation, and recreational activities that improve quality of life. Distributions must be discretionary and supplemental to public benefits, avoiding payments that could be interpreted as income or resources by program administrators. Trustees should consult the trust terms and benefit guidelines before making larger expenditures to ensure compliance while addressing the beneficiary’s needs.
If the beneficiary relocates, the trust generally remains effective, but local Medicaid and service rules may differ between states or counties. Trustees should review the trust provisions, consult counsel about any necessary amendments, and confirm continued eligibility under the new jurisdiction’s rules. Advance planning and prompt legal review reduce the risk of service interruptions and allow adjustments to trustee authority and distribution practices to align with local program requirements.
Review a special needs trust periodically and after major life events such as changes in health, significant new assets, caregiver transitions, or legislative changes affecting public benefits. Routine reviews ensure that trustee instructions, funding sources, and distribution standards remain appropriate. Proactive updates prevent unintended eligibility problems and adapt the plan to new priorities or available community resources, providing long-term stability for the beneficiary’s care.
Hatcher Legal guides families through trust selection, drafting, funding, and trustee training, and offers periodic reviews to keep the plan effective. Bring documentation of current benefits, asset statements, any expected settlements or inheritances, existing estate planning documents, and information about caregivers and medical needs to the initial consultation. This information allows us to evaluate options and propose a tailored, practical plan to protect benefits and enhance the beneficiary’s quality of life.
