special needs trustn.
Reviewed by Owen Hathaway, AttorneyUpdated June 5, 2026A trust that holds assets for a person with disabilities without disqualifying them from need-based benefits like Medicaid and SSI.
A special needs trust (or supplemental needs trust) holds and manages assets for a beneficiary with disabilities in a way that supplements, rather than replaces, public benefits such as Medicaid and Supplemental Security Income. Because the beneficiary cannot directly control the funds, the assets are not counted against benefit eligibility limits.
Trust funds are used for needs not covered by public benefits. Trusts funded with the beneficiary's own assets (first-party trusts) generally must repay Medicaid at death; third-party trusts funded by family generally do not.
These trusts operate against federal benefit rules (42 U.S.C. § 1396p) and are administered under the Colorado or Wyoming trust codes. Drafting must track both the federal eligibility rules and the relevant Medicaid agency requirements.
Related terms
- Medicaid planningArranging finances in advance, within the rules, to qualify for Medicaid long-term care without needlessly spending down a lifetime of savings.
- irrevocable trustA trust that generally cannot be changed or revoked after it's created. Giving up control is the price for benefits like asset protection and tax planning.
- spendthrift trustA trust with a clause that keeps a beneficiary from giving away or borrowing against their interest and blocks the beneficiary's creditors from reaching it before distribution.