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Southern New England's Certified Elder Law Attorney

Rhode Island, Connecticut and Massachusetts

Special Needs Planning


What is a Special Needs Trust?

A special needs trust (SNT) is a trust tailored to a person with special needs that is designed to manage assets for that person's benefit while not compromising access to important government benefits.


There are three main types of special needs trusts: the first-party trust, the third-party trust, and the pooled trust. All three name the person with special needs as the beneficiary.


A "first-party" special needs trust holds assets that belong to the person with special needs, such as an inheritance or an accident settlement. A "third-party" special needs trust holds funds belonging to other people who want to help the person with special needs. A pooled trust holds funds from many different beneficiaries with special needs.

Why a Special Needs Trust?

The reason there are several different types of trusts has to do with regulations regarding Supplemental Security Income (SSI). SSI is a government program that assists people with low incomes who have special needs. In order to qualify for SSI, an applicant or beneficiary can have only $2,000 in his own name. If the person has more than $2,000 in his own name, (typically because of excess savings, an inheritance or an accident settlement), the government allows him to qualify for SSI so long as he places his assets into a first-party special needs trust.  While the beneficiary is living, the funds in the trust are used for his benefit, and when he dies, any assets remaining in the trust are used to reimburse the government for the cost of his medical care. These trusts are especially useful for beneficiaries who are receiving SSI and come into large amounts of money, because the trust allows the beneficiary to retain his benefits while still being able to use his own funds when necessary.

The Third-Party Trust

The third-party special needs trust is most often used by parents and other family members to assist a person with special needs. These trusts can hold any kind of asset imaginable belonging to the family member or other individual, including a house, stocks and bonds, and other types of investments. The third-party trust functions like a first-party special needs trust in that the assets held in the trust do not affect an SSI beneficiary's access to benefits and the funds can be used to pay for the beneficiary's supplemental needs beyond those covered by government benefits.


But a third-party special needs trust does not contain the "payback" provision found in first-party trusts. This means that when the beneficiary with special needs dies, any funds remaining in her trust can pass to other family members, or to charity, without having to be used to reimburse the government.


The Pooled Trust

A pooled trust is an alternative to the first-party special needs trust, and is discussed in greater detail here. Essentially, a charity sets up these trusts that allow beneficiaries to pool their resources for investment purposes, while still maintaining separate accounts for each beneficiary's needs.  When the beneficiary dies, the funds remaining in her account reimburse the government for her care, but a portion also goes towards the non-profit organization responsible for managing the trust.

Remember, a special needs trust provides resources to ensure that a family member with special needs receives the care he or she requires. It places responsibility for managing the assets with a qualified trustee, and it protects the assets from creditors and fraudsters. Perhaps most important, it allows you to assist a loved one without jeopardizing his or her eligibility for government benefits.

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Choosing a Trustee

Being appointed and serving as the trustee for a Special Needs Trust is a profoundly serious undertaking with the trustee being held to a high standard of performance, much higher than the performance that is acceptable for the person's own financial affairs. The role of the SNT trustee includes many responsibilities that are best discussed in-depth with a special needs planning attorney like RJ Connelly III.

Serving as a trustee to a special needs trust requires compassion, competence, and a willingness to dedicate the time needed and have an intimate understanding of the beneficiary's needs. Even with many demanding tasks, family members and friends often serve as trustees without compensation, however, this depends on the needs of the recipient. In some cases, the duties are especially formidable, and in many situations, compensation may be appropriate and incentivize a potential trustee to accept the role.  If someone decides to include compensation for the non-professional trustee, a special needs planning attorney can help structure the SNT to address compensation issues for them. If a decision is made to use a professional trustee, keep in mind that they have varying billing rates to consider.

Contact Us!
Rhode Island elder law attorney

Establishing special needs trusts is a complex job, and there are important considerations to keep in mind regarding public benefits, tax implications and the impact of the trust on a family’s overall financial and estate plan. Our firm will take the time to understand your needs, and we will provide you with comprehensive advice throughout the process.

                                                                                                                ---- RJ Connelly III

Rhode Island, Southeastern Massachusetts and Eastern Connecticut Elder Law Attorney

Rhode Island Fiduciary

Call Connelly Law Today

Rhode Island Elder Law Attorney

Phone:  401-724-9400

Fax:  401-724-3046

Our office locations


47 Water St., Suite 101

Mystic, CT  06355


This website includes general information about legal issues, issues affecting seniors and developments in the law. Such materials are for informational purposes only and may not reflect the most current legal developments. These informational materials are not intended, and must not be taken, as legal advice on any particular set of facts or circumstances. You need to contact a lawyer licensed in your jurisdiction for advice on specific legal issues and/or problems.

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Pawtucket, RI  02860



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