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What Is a Special Needs Trust?

An individual with disabilities often needs to protect their current or future public benefits. In fact, holding assets over certain amounts can disqualify a person with disabilities from various government benefits. The solution? Establish a special needs or supplemental needs trust. These trusts provide a safe harbor for assets of a person with disabilities and keeps the trust assets from being counted when determining eligibility for public benefit programs.

We act as trustee for minors or adults with disabilities. Midland Trust Company advocates for individuals and helps them live full and enriched lives.

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special needs trust iconHow Is a Special Needs Trust Used?

Assets in special needs trusts may be used to pay for many things that government programs don’t cover to help improve and enrich your loved one’s quality of life. The trust may make funds available for therapies, procedures and specialized medical equipment not covered by basic public benefits, as well as for education, training and other items to make your loved one's life more comfortable and enriched.

In some cases, funds may also be used to buy or pay for:

  • A home, property taxes, and insurance
  • Home renovations
  • A car, any vehicle repairs, and insurance
  • Dental services
  • Companion and care services
  • Travel expenses
  • Internet, cable, and telephone services
  • Personal property
  • Tutoring, educational devices, and software
  • Classes, clubs, and extracurriculars

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Types of Special Needs Trusts

There are two types of special needs trusts — first-party and third-party. Each has particular requirements, so it's important to know which type you have or need.



First-Party Special Needs Trust

First-party special needs trusts — also known as self-settled special needs trusts — are funded with assets of an individual with disabilities. They are typically used when a person with disabilities receives a court settlement or inherits money or property.


Some adults with disabilities under the age of 65 can establish and fund a special needs trust without court involvement. If the person with disabilities is a minor or deemed legally incompetent, then a guardian or the court must establish the trust.


A first-party special needs trust is often referred to as a “payback trust” because when the beneficiary dies, any remaining assets in the trust must first be used to reimburse the state’s Medicaid agency for any costs incurred during the person’s life. After Medicaid is repaid, then the remaining assets can pass to other beneficiaries.


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Third-Party Special Needs Trust

Third-party special needs trusts are typically created and funded by the parents, siblings, grandparents or other loved ones of a person with special needs. These trusts can be drafted as a stand-alone legal document or included in a last will and testament or living trust.


A third-party special needs trust exists throughout the life of the person with special needs, and funding can come from multiple sources. If the third-party special needs trust is included in a will or living trust, the funds can't be distributed until after the death of the individual who established it.


When the beneficiary of a third-party special needs trust dies, there is no Medicaid paid back from the trust assets. Instead, the funds pass to the remainderman as designated by the person who established the special needs trust.


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Our Special Need Trust Services

As a trustee of either a 1st or 3rd party special needs trust, Midland Trust Company provides:

  • Protection, security and comfort through careful review of your loved one's needs in relation to government benefits
  • Availability when and where you need us, guiding you through important considerations
  • Personalized service with a dedicated trust officer and administrator

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Special Needs Trusts FAQ

Virtually any person with disabilities who receives Medicaid or Supplemental Security Income (SSI) can benefit from a special needs trust.

A person with disabilities can't receive funds directly because it might interfere with benefit eligibility, such as Medicaid and SSI. Instead, a trustee can spend trust assets on the beneficiary's behalf.

The trustee manages, distributes, and invests trust funds. They must distribute funds in the sole and best interest of the beneficiary and ensure continued eligibility for government benefit programs, such as Medicaid and SSI.

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At Midland Trust Company, we specialize in administering special needs trusts. We are highly experienced in managing trusts and finding solutions for unique circumstances. We support beneficiaries and their families with compassion and respect.

We help save money by negotiating with outside vendors to reduce costs and offer competitive fees. Midland Trust Company provides personalized, best-in-class service to our beneficiaries.

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Contact our expert team to learn more about how we can help with special needs trusts.

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