There are two types of Special Needs Trusts that are commonly prepared for disabled individuals.
While the general purposes of Third Party Special Needs Trusts (a/k/a supplemental special needs trusts) and Self-Settled Special Needs Trusts are similar, they are very different with respect to how they are established and administered.
Self Settled Special Needs Trusts are established with the assets of a disabled person. These types of trusts are commonly used when a disabled person receives money as a result of a personal injury litigation or an unexpected inheritance. The main purposes of Self-Settled Special Needs Trusts are to prevent the disabled person from losing their needs-based governmental benefits and to prevent the quick exhaustion of the funds received. Self-Settled Special Needs Trusts allow the disabled person to enjoy the benefits of a personal injury recovery or inheritance while not losing their public benefits.
Third Party Special Needs Trusts are established by a third party (someone other than the disabled person) with their own assets for the benefit of a disabled person. Typically, these types of trusts are established by a parent or other relative for the benefit of a disabled child. A Third Party Special Needs Trust is the preferred form of distribution when a relative desires to provide for a disabled person because it can achieve the goals of enriching the disabled person's life and preserving the public benefits that are available to them.
Both forms of Special Needs Trusts are designed so that the trust funds are not considered "available" to the disabled beneficiary for purposes of qualifying for needs based governmental programs, such as Medicaid and SSI.
If you would like to learn more about Special Needs Trusts, then talk to an experienced estate planning attorney for the details about setting one up.