Special Needs Trusts: Your Questions Answered

 There are a lot of rules, especially around money and benefits. A Special Needs Trust can help. Below are answers to common questions.

What is a Special Needs Trust?

A Special Needs Trust (SNT) is a way to set aside money for a person with a disability.

This money can be used to support them without losing important benefits like Medicaid or SSI.

Why is a Special Needs Trust important?

Some government benefits have strict limits on money and assets.

For example:

• SSI has a limit of about $2,000 in assets
• In Illinois, Medicaid programs may allow up to about $17,500 in assets (depending on the program)

If someone has more than these limits:

• They could lose their benefits

A Special Needs Trust helps by:

• Protecting benefits
• Holding money safely
• Planning for the future

Do I need an attorney to set up a Special Needs Trust?

Yes.

A Special Needs Trust must follow strict legal rules. Because of this:

• An attorney should prepare the trust
• This helps protect benefits
• It helps avoid mistakes that could cause someone to lose support

What types of Special Needs Trusts are there?

First-Party Trust: This trust uses the person’s own money (like from a lawsuit or inheritance).

• Must be set up before age 65
• Must be paid back to Medicaid after death

Third-Party Trust: This trust is funded by family or others.

• Often set up by parents
• No Medicaid payback
• Money can go to other family members later

Pooled Trust: This trust is managed by a non-profit organization.

• It is a type of first-party trust
• Funds are managed together but tracked separately
• In Illinois, it requires Medicaid payback after death

This can be a good option if you need help managing the trust.

What can the trust pay for?

The trust can pay for things that make life better, such as:

• Medical or dental care not covered by insurance
• Therapy or support services
• Education or job training
• Travel and fun activities
• Technology or personal items

It is meant to add to benefits, not replace them.

What can’t the trust do?

There are some limits:

• It should not give cash directly to the person
• It should not replace basic needs covered by benefits
• It must follow strict rules

That’s why it’s important to work with an attorney and a trusted manager.

Who manages the trust?

The trust is managed by a trustee.

The trustee:

• Handles the money
• Pays for approved expenses
• Keeps records

This can be:

• A family member
• A professional
• A non-profit organization

What is Medicaid payback?

Some trusts must pay Medicaid back after the person passes away.

This applies to:

• First-party trusts
• Pooled trusts in Illinois

That means:

• The state may recover money used for care during the person’s life

Third-party trusts do not have this rule.

How is this different from an ABLE account?

Both tools help protect benefits, but they work in different ways.

ABLE Accounts

• Can be set up without an attorney
• Easier to use for everyday spending
• Allow up to $20,000 per year in contributions
• Good for smaller amounts of money

You can learn more or open an account here:
👉 IL ABLE Accounts for Individuals with Disabilities | IL ABLE

Special Needs Trusts

• Must be set up by an attorney
• Better for larger amounts of money
• Used for long-term planning

Many families use both together.

When should you set one up?

It’s best to plan early.

You may want to set one up:

• Before receiving money or an inheritance
• When starting benefits
• As part of your family’s long-term plan

A Special Needs Trust helps protect your loved one’s future.

It allows them to:

• Keep important benefits
• Have extra support
• Enjoy a better quality of life

If you’re not sure where to start, talking to a professional can help you take the next step.