Special Needs Trusts: The Complete Guide

The SSI Asset Limit and Why It Changes Everything

SSI requires your child to have less than $2,000 in countable assets at all times. If they ever exceed this — even briefly — they lose benefits that month. An inheritance of any size, a personal injury settlement, even a well-meaning gift check from grandma can trigger this. The cruel part: it often happens after a parent dies, when the child is most vulnerable and benefits are most needed.

A properly drafted third-party SNT means assets held IN the trust are not counted toward the $2,000 limit — your child benefits from the money without losing SSI or Medicaid. This is why estate lawyers who don't specialize in special needs law are dangerous here — they may leave money directly to your child, not knowing about SSI rules.

First-Party vs. Third-Party SNTs

Two main types exist, with very different rules:

Third-party SNT — funded with money from ANYONE EXCEPT the beneficiary. Parents, grandparents, aunts, uncles. No dollar limit. When the beneficiary dies, remaining money goes to whoever the trust names (your other children, a charity). This is what most families need and should set up proactively.

First-party SNT (d4(a) trust) — funded with the beneficiary's OWN money (a personal injury settlement, a direct inheritance that already happened). Has a Medicaid payback provision: when the beneficiary dies, the state can reclaim what Medicaid spent. Still valuable — better to protect benefits going forward than lose them — but has strings attached.

Pooled trusts — a third option managed by a nonprofit. Good for smaller amounts where a private trustee isn't practical.

What an SNT Can (and Cannot) Pay For

The trustee has broad discretion to spend on things that improve quality of life. Generally OK: therapy beyond what insurance covers, medical equipment, AAC devices, computers and tablets, vacations and recreation, vehicle modifications, education, hobbies, clothing, personal care items.

The critical exceptions: SNTs should NOT pay for food or housing (rent, mortgage, utilities). These are "in-kind support and maintenance" (ISM) under SSA rules and will reduce the SSI payment dollar-for-dollar up to 1/3 of the benefit. Some families get around this by having the trust pay for a home the beneficiary owns outright — getting legal advice specific to your state matters here.

Also cannot: give cash directly to the beneficiary (counts as income), pay for things that could otherwise be paid by Medicaid.

How to Set One Up

1. Find a special needs attorney — the Special Needs Alliance has a directory by state. Expect to pay $1,500–$3,500 for a well-drafted trust.
2. Choose a trustee carefully — this person will manage money for your child potentially for decades. A family member who knows your child well OR a professional trustee (bank or nonprofit). Name a successor trustee in case your first choice can't continue.
3. Fund the trust — the document is just a shell until money goes into it. Fund it through your will, a life insurance policy naming the trust as beneficiary, or gifts from family members.
4. Tell everyone — make sure your parents, siblings, and anyone who might leave money to your child knows about the trust and has its legal name and EIN to use in their own estate documents.
5. Review regularly — trust law and benefit rules change; review every few years or when circumstances change.

The Letter of Intent: The Most Valuable Document No One Talks About

A letter of intent isn't a legal document — it won't be enforced by a court. But it may be more important than the trust itself. It's a guide you write for whoever will care for your child after you're gone.

Cover:

• Daily routine and what happens when it's disrupted
• Communication style and what words/signals mean
• Foods they love and won't touch
• Sensory triggers and calming strategies
• Medical history and medication
• The people they're close to
• Their interests and what brings them joy
• Their goals and how they like to be treated

Write it in plain language, from one caregiver to another. Update it every year or two. Some families write it as a letter directly to their child's future caregiver. There's no required format — what matters is that someone who doesn't know your child could read it and understand how to help them thrive.