The Pros and Cons of Special Needs Trusts

If you are debating setting up a special needs trust for a loved one, you may be asking yourself if it is worth it and if you need to hire a special needs estate planning agency to do it. In the former, there are pros and cons; in the latter, you should rely on proven experts because of the legalities and complexity. Here are some things to think about as you make your decision.

Benefits Eligibility

Setting up a special needs trust enables a person to continue to be eligible to receive government assistance and benefits. This includes Medicaid and SSI. The trust also allows a person to receive their benefits and use trust revenue to cover what government programs will not. In many cases, the ability to cover expenses extraneous to government programs can make a huge difference in the quality of life of the special needs individual.

Earmarks Funds

The term “earmark” has been politicized, which is a shame because all it means is that something is set aside with a specific purpose. In the case of an irrevocable trust like a special needs trust, that means the funds in the trust and any revenue generated by assets in the trust are specifically designated to be used by the person for whom the trust was set up. This means no one can take over a trust and use the assets or revenue for their own purpose. Any assets must be spent on the care of the trust recipient.

Creditor Protection

The funds of a trust can only be used to care for the trust recipient. Creditors cannot go after the assets or funds in a trust, nor is anything in the trust made available to them.


The cost of setting up a trust of any sort, but especially a special needs trust, can be very high. In some cases, that cost scares people off. Protecting assets to care for someone who has special needs, however, makes the cost worth it. In some cases, payment arrangements can be made with the agency setting up the trust.


A trust has rules and that can mean a loss of independence for the person with special needs, mainly as it pertains to getting access to funds.

Medicaid Payback

Some assets in a special needs trust can be used to pay back Medicaid once the trust ends (say when the trust recipient dies.)

If you are still debating, talk to a trust management professional. By working with a special needs estate planning agency, you can set up a trust that ensures the quality of life of your loved one. It is worth the time and effort.

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