Special Needs Trusts
by Claudia Center

Reprinted with permission from Outreach, Fall 2000, a Publication of the National Depressive and Manic Depressive Association

Claudia Center is a staff attorney at the Employment Law Center, where she specializes in disability rights and gender discrimination.

Frequently, state and federal benefits programs require that a recipient use his or her own assets first for such expenses before the benefits program starts. As a result, parents and other family members who wish to assist their disabled relative cannot simply give significant sums of money "with no strings attached." Assets provided without qualification to the disabled person would quickly be depleted to pay for the person’s basic medical expenses and other needs. This typically undermines the family member’s desire to assist the disabled person in having additional services that publicly funded programs can’t provide. Further, any creditors the disabled person may have would be able to make a claim against such assets.

A special needs trust avoids the demands of benefits program by distributing its assets on behalf of the disabled beneficiary only to pay for dental services or therapy sessions that are not covered by Medicaid. A special needs trust could pay for educational services that are not covered by the state’s vocational rehabilitation program. However, a special needs trust would not pay for medications that are already provided by Medicaid.

A special needs trust cannot be created by the disabled individual him or herself; it must be set up and funded by someone else, like a friend or family member. The trust can be set up while the generous friend or family member is living, or it can be set up through a will. Life insurance is a common way to fund special needs trusts.

If you wish to set up a special needs trust to benefit a disabled person, you should contact an expert in estate planing. Estate planning is tricky business; do not rely on your friend or your neighbor to write up a special needs trust. Instead, contact your local bar association through for a trust lawyer referral.

1(800)826-3632 or look at their web site at They are located at the following address: National DMDA, 730 N. Franklin Street/Suite 501 Chicago, IL 60610.