Coleman Legal Group, LLC
Phone: 470-947-2471
Special Needs Trusts
Special needs trusts, also known as supplemental needs trusts, are specifically designed to preserve assets and provide benefits to elderly or disabled beneficiaries without jeopardizing their eligibility for government programs and benefits such as Medicaid and Social Security Disability.
Key Differences Between Special Needs Trusts and Ordinary Trusts
There are several distinctions between an ordinary trust and a special needs trust, primarily relating to the trusts’ impact on the beneficiaries’ government benefits and the protections afforded to the beneficiary. Ordinarily, trusts are fiduciary arrangements that allow a trustee to hold and manage the trust on the beneficiary’s behalf, with beneficiaries often having direct access to the funds. Trusts can be structured to meet various financial and estate planning goals, such as asset protection, tax planning, and providing for family members. However, regular trusts do not have specific provisions to protect the beneficiary’s eligibility for government benefits. Therefore, special needs trusts are especially advantageous for prospective trustees interested in supplementing their beneficiary’s government benefits.
Protection of Trust Assets
Special needs trusts have specific provisions that protect trust assets from creditors so they can only be used for the beneficiary’s benefit. Such a trust ensures that the funds are used for the beneficiary’s supplemental needs, which often include medical care not covered by government programs, education, and personal expenses, without affecting their eligibility for public assistance.
Spendthrift Provisions in Special Needs Trusts
Spendthrift provisions are clauses that limit who can access a trust fund to protect beneficiaries from creditors or having their interests transferred to someone else. Georgia law explicitly states that spendthrift provisions in a trust generally do not apply to contributions made by the beneficiary, except in the case of a special needs trust, providing an additional layer of protection from creditors not ordinarily available. See O.C.G.A. § 53-12-80.
Types of Special Needs Trusts
Similar to regular trusts, which are divided into two categories, revocable and irrevocable, which are based on control, special needs trusts are divided into two additional types: first-party special needs trusts and third-party special needs trusts, both of which depend on who the grantor is. Special needs trusts are generally irrevocable.
- First-Party Special Needs Trusts: These are funded with the assets of the elderly or disabled person. Remaining funds generally need to be paid back to Medicaid following the beneficiary’s death.
- Third-Party Special Needs Trusts: These are funded by someone other than the elderly or disabled person, usually friends or family members of the beneficiary. Such trusts are not subject to Medicaid payback upon the beneficiary’s death.
Role of the Trustee
The trustee of a special needs trust has the discretion to distribute income and principal to the beneficiary for needs not covered by government programs. In a regular trust, the beneficiary has more direct access to the trust’s funds, depending on its terms, while the trustee maintains discretion over the trust’s management and distribution, subject to those terms set by the grantor.
In a special needs trust, a fiduciary relationship is created between the trustee and the beneficiary, because the trustee must act in a way that benefits the disabled party without jeopardizing their government assistance. Here, the beneficiary does not have direct access to the trust’s funds; instead, the trustee manages the trust in a manner that considers the beneficiary’s pre-existing benefits.
Restrictions on Distributions
Trusts generally have no restrictions on their distribution, so long as it aligns with the grantor’s terms. However, special needs trusts require that the trust’s assets do not replace government benefits. A disabled or elderly beneficiary cannot use the trust account to purchase food, housing, or utilities if those are already covered by Supplemental Social Security or Medicaid. Government benefits generally allow disabled or elderly program recipients to live with family without disrupting their benefit eligibility. The use of trust funds to purchase goods or services that are already covered by government programs may result in the beneficiary’s government benefits being taken away or denied.
Federal and State Compliance
To protect one’s government benefits, special needs trusts must comply with 42 U.S.C. § 1396p(d)(4)(A) and 1396p(d)(4)(C), ensuring that trust assets are not considered available resources for the purpose of determining government benefit eligibility.
See 42 U.S.C. § 1396p(d)(4)(A) and 1396p(d)(4)(C); O.C.G.A. § 53-12-80; O.C.G.A. § 19-6-15.2; O.C.G.A. § 19-6-15.1.
Special Needs Trusts in Georgia
In Georgia, special needs trusts are primarily limited by federal statutes and considerations, meaning there are few state-specific restrictions, making their application in Georgia fairly similar to other states. However, Georgia’s Medicaid policies are relevant in determining what is covered by Medicaid, ensuring that special needs trust funds are not used for those items and services. Georgia offers Medicaid waiver programs such as New Options Waiver (NOW) and the Elderly and Disabled Waiver Program (EDWP), each of which has its own implications for a special needs trust.
Eligibility for Government Programs
In order to understand special needs trusts, it is important to first consider the federal restrictions placed on them and the eligibility requirements for Social Security and Medicaid.
As of 2025, individuals must have less than $2,000 in assets to qualify for Supplemental Security Income (SSI). This means the beneficiary of a special needs trust must have less than $2,000 in countable assets to remain eligible for benefits. When a special needs trust is executed properly, the trust assets are excluded from countable assets. Therefore, if a special needs trust is properly executed, the assets in it will not count against the beneficiary’s eligibility for SSI.
As of 2025, Medicaid has the same asset limit as SSI. This ultimately means a special needs trust must be structured to meet both program’s requirements. If executed properly, it may not impact the beneficiary’s eligibility for either program, although there could be further consequences upon the beneficiary’s death, especially where Medicaid is concerned.
Medicaid Payback Requirement
It is important to consider Medicaid’s payback requirement when determining whether a special needs trust is right for you and your family. As mentioned earlier, first-party special needs trusts are generally subject to Medicaid’s payback requirement, while third-party special needs trusts are not. In a first-party, self-funded, special needs trust, Medicaid requires that upon the beneficiary’s death, the remaining funds in the trust must be paid back to Medicaid to reimburse the program for the amount spent on their care. Despite this, there are various benefits to creating a special needs trust, regardless of who funds it.
Benefits of a Special Needs Trust
One of the most prominent benefits of a special needs trust is that it allows disabled or elderly beneficiaries to preserve their government assistance while also affording them an opportunity to maintain a better quality of life than would otherwise be possible. Where government assistance does not cover certain expenses, special needs trusts, when executed properly, allow for those additional expenses to be paid for by a source of supplemental income.
The Importance of Legal Guidance
The execution of a special needs trust requires a heightened level of attention to detail. Therefore, an attorney’s expertise is needed to forecast changing Supplemental/Social Security Income, Medicaid, and Medicaid Waiver eligibility requirements, ensuring that special needs trusts are created in compliance with both federal and Georgia-specific statutes.
Trusts, Wills, Probate, Estate Planning and Administration – Georgia Areas We Serve
Our Georgia Estate Planning attorneys handle cases in the following cities and communities: Atlanta, Alpharetta, Roswell, Duluth, Johns Creek, Milton, Cumming, Suwanee, Marietta, Woodstock, Sandy Springs, Kennesaw, Gainesville, Midtown Atlanta, Norcross, Lawrenceville, Kennesaw, Duluth, Buckhead, Dunwoody, Vinings, Smyrna, Buford, Inman Park, Old Fourth Ward, Decatur, Grant Park, East Atlanta, and the Virginia Highlands.
Our Georgia Estate Planning attorneys frequently handle cases for clients residing in the following counties: Fulton, Gwinnett, Forsyth, Cobb, DeKalb, Henry, Cherokee, Douglas, Carroll, Coweta, Paulding, Bartow, Hall, Barrow, Walton, Newton, Rockdale, Henry, Spalding, Fayette, and Clayton.
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Georgia Areas We Serve
Our Georgia lawyers and attorneys handle cases in the following cities and communities: Atlanta, Alpharetta, Roswell, Duluth, Johns Creek, Milton, Cumming, Marietta, Woodstock, Kennesaw, Gainesville, Midtown Atlanta, Norcross, Lawrenceville, Kennesaw, Duluth, Buckhead, Dunwoody, Vinings, Smyrna, Buford, Inman Park, Old Fourth Ward, Decatur, Grant Park, East Atlanta and the Virginia Highlands.
Our Georgia lawyers and attorneys frequently handle cases for clients residing in the following counties: Fulton, Gwinnett, Forsyth, Cobb, DeKalb, Henry, Cherokee, Douglas, Carroll, Coweta, Paulding, Bartow, Hall, Barrow, Walton, Newton, Rockdale, Henry, Spalding, Fayette and Clayton.
Our main office is located in Alpharetta Georgia at: 11539 Park Woods Circle, Suite 304, Alpharetta, GA 30005.
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Updated: 2025-07-24
