Q What is a Special Needs Trust?
Often people refer to a Special Needs Trust and a Supplemental Needs Trust interchangeably. Actually, they are two distinct types of trusts.
A Special Needs Trust is usually funded with someone's own money for their personal benefit. For example, someone who becomes disabled would create a Special Needs Trust to set aside their own funds to supplement government benefits.
A Supplemental Needs Trust is usually funded with money from a 3rd party, such as a parent of grandparent. For example, a parent or grandchild may set aside funds for their child or grandchild.
Parents of a special needs child would create a Supplemental Needs Trust. The purpose of a Supplemental Needs Trust is to provide assets to supplement the needs of your disabled or special needs child. In the absence of this type of planning, any money you leave for your child could cause them to lose much needed government benefits. They would have to burn through the assets you've left for them before being able to reapply for government benefits.
By creating a properly set up and manage Supplemental Needs Trust, the money you leave for your child can be used to supplement rather than replace any government benefits they are getting or may get in the future.