Supplemental Needs Trusts

Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on February 29, 2024

Get Any Financial Question Answered

What Are Supplemental Needs Trusts (SNTs)?

A Supplemental Needs Trust is a legal arrangement designed to provide financial support for a person with disabilities without jeopardizing their eligibility for government benefits such as Medicaid or Supplemental Security Income (SSI).

The trust is established by a third party or the beneficiary themselves and managed by a trustee. The primary objective of an SNT is to preserve the beneficiary's eligibility for government benefits while providing additional funds to enhance their quality of life.

This can include paying for medical expenses not covered by government programs, education, recreation, and other supplemental needs that contribute to the beneficiary's well-being.

Supplemental Needs Trusts are essential because they ensure that individuals with disabilities have access to resources that improve their quality of life without disqualifying them from receiving vital government benefits.

These trusts protect the beneficiary's assets and provide a legal framework for managing and distributing funds according to their unique needs and circumstances.

Read Taylor's Story

Taylor Kovar, CFP®

CEO & Founder

(936) 899 - 5629

[email protected]

I'm Taylor Kovar, a Certified Financial Planner (CFP), specializing in helping business owners with strategic financial planning.

In a recent case, I assisted a client whose daughter had special needs by establishing a Supplemental Needs Trust. This strategic move safeguarded her eligibility for essential government benefits while ensuring her long-term financial security and care. By meticulously selecting trustees and aligning the trust with her specific needs, we created a robust financial safety net. If you're navigating similar challenges, let's collaborate to secure your loved one's future.

Contact me at (936) 899 - 5629 or [email protected] to discuss how we can achieve your financial objectives.


  • Fee-Only Financial Advisor
  • Certified Financial Planner™
  • 3x Investopedia Top 100 Advisor
  • Author of The 5 Money Personalities & Keynote Speaker


Business Owners, Executives & Medical Professionals


Strategic Planning, Alternative Investments, Stock Options & Wealth Preservation

How Supplemental Needs Trusts Work

Supplemental Needs Trusts are designed to support individuals with disabilities without jeopardizing their eligibility for government benefits.

These trusts work by holding and managing funds for the beneficiary's benefit, providing supplemental assistance beyond what public assistance programs cover.

SNTs are typically created by a parent, guardian, or court and are administered by a trustee.

The trustee has the discretion to use the trust funds to enhance the beneficiary's quality of life, such as covering medical expenses, housing, transportation, education, and other essential needs.

By properly structuring an SNT, individuals with disabilities can maintain their eligibility for vital government benefits while still receiving additional support.

Types of Supplemental Needs Trusts

First-Party Supplemental Needs Trusts

First-party SNTs are funded with the beneficiary's own assets, such as an inheritance or a personal injury settlement.

These trusts are often established when a person with disabilities receives a large sum of money that would otherwise disqualify them from government benefits.

In many cases, first-party SNTs are subject to a "payback" provision, which requires the trust to reimburse the state for Medicaid benefits provided to the beneficiary upon their death.

Third-Party Supplemental Needs Trusts

Third-party SNTs are funded by assets contributed by someone other than the beneficiary, such as family members or friends. These trusts are often used as an estate planning tool to provide financial support to a loved one with disabilities.

Unlike first-party SNTs, third-party trusts are not subject to payback provisions, allowing any remaining trust assets to be distributed to other beneficiaries upon the disabled individual's death.

Requirements for Supplemental Needs Trusts


A trustee is the person or entity responsible for managing the trust assets and making distributions on behalf of the beneficiary.

The trustee must be someone who is trustworthy, responsible, and knowledgeable about the beneficiary's needs and the requirements of the trust.


The beneficiary is the person with disabilities who will receive the benefits of the trust. To qualify for an SNT, the beneficiary must be under the age of 65 and have a disability that significantly impairs their ability to engage in gainful employment or daily activities.


The assets used to fund an SNT can include cash, investments, real estate, or other valuable property.

These assets are held in the trust and used to pay for the beneficiary's supplemental needs. It is crucial to carefully consider the amount and type of assets used to fund the trust to ensure that the beneficiary's needs are met while preserving their eligibility for government benefits.

Medicaid and SSI Eligibility

To maintain eligibility for Medicaid and SSI, the trust must be structured in compliance with federal and state regulations.

This includes ensuring that the trust is irrevocable, the beneficiary cannot directly control or access trust assets, and trust distributions are limited to supplemental needs not covered by government benefits.

Failure to meet these requirements may result in the beneficiary losing their government benefits, making it essential to consult with an experienced attorney when setting up an SNT.

Advantages of Supplemental Needs Trusts

Protection of Government Benefits

One of the main advantages of SNTs is the protection of government benefits for the beneficiary.

By placing assets in an SNT, the beneficiary's financial resources are not counted towards their eligibility for Medicaid and SSI, allowing them to continue receiving these essential services.

Control of Trust Assets

SNTs offer control over how trust assets are managed and distributed. The trustee has a fiduciary duty to act in the best interest of the beneficiary and ensure that trust assets are used according to the terms of the trust.

This provides a level of oversight and accountability that can be reassuring to family members or others concerned about the beneficiary's well-being.

Flexibility in Distribution of Trust Funds

SNTs allow for flexibility in how trust funds are used to meet the beneficiary's supplemental needs.

The trustee can make distributions for various purposes, such as medical expenses, education, recreational activities, or home modifications, as long as these expenses are not covered by government benefits.

This flexibility enables the beneficiary to enjoy a higher quality of life while preserving their government benefits.

Disadvantages of Supplemental Needs Trusts

Cost of Setting Up and Maintaining the Trust

Establishing and maintaining an SNT can be costly. Legal fees, trustee fees, and ongoing administrative expenses can add up over time, potentially reducing the amount of trust assets available to the beneficiary.

It is essential to weigh the potential benefits of an SNT against these costs when considering this option.

Limited Use of Trust Funds

While SNTs provide financial resources for supplemental needs, they cannot be used to cover basic living expenses such as food, clothing, and shelter, as these are generally covered by government benefits.

This limitation can be frustrating for beneficiaries and their families, who may wish to use trust assets more freely to improve the beneficiary's quality of life.

Restrictions on the Beneficiary's Control of Trust Assets

The beneficiary of an SNT has no direct control over trust assets or distributions. This lack of control can be difficult for some individuals, especially if they feel that their needs and preferences are not being adequately addressed by the trustee.

In some cases, disputes between beneficiaries and trustees may arise, necessitating legal intervention.


The Bottom Line

Supplemental Needs Trusts are a type of trust designed to provide financial support to individuals with disabilities without disqualifying them from government benefits such as Medicaid and SSI.

The trust assets are managed by a trustee and are used to pay for expenses that are not covered by government benefits.

Supplemental Needs Trusts are valuable tools for providing financial support to individuals with disabilities while preserving their eligibility for government benefits.

Understanding the different types of SNTs, the requirements for establishing and maintaining these trusts, and their advantages and disadvantages is crucial for making informed decisions about whether an SNT is the right choice for a particular individual.

It is essential to consult with an experienced attorney when considering establishing an SNT, as navigating the complex legal requirements and regulations can be challenging.

Ultimately, the decision to establish an SNT should be based on a thorough evaluation of the beneficiary's unique needs and circumstances, as well as the potential benefits and drawbacks of this legal arrangement.

Supplemental Needs Trusts FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.

Search Estate Planning Law Firms in Your Area