Supplemental or Special Needs Trust Q&A

I would bet nearly 20% of all trust we create include some form of a "needs" or support clause. Said another way, nearly 1 in 5 estate plan includes a SNT provision. 

Planning for the long-term care and financial security of a loved one with a disability or addiction can feel overwhelming and even at times distance. The MOST powerful tool I see families use is a Special/Supplemental Needs Trust (SNT). These trusts are designed to provide for the unique needs or care of an individuals without jeopardizing government benefits or outside support. 

Below, we answer some of the most common questions about SNTs to help you understand whether this planning tool is right for your family...

Q: What is a Special Needs Trust (SNT)?
An SNT is a type of trust that holds assets for the benefit of a person with a disability. It allows the trustee to use the funds to supplement, but not replace benefits. The funds from this trust can cover expenses like education, transportation, out-of-pocket medical costs, entertainment, and personal care.

Q: Is a Special Needs Trust the same as a Supplemental Needs Trust?
Yes. The terms are often used interchangeably. Both refer to trusts designed to supplement, rather than replace, public benefits. 

Q: Who can establish an SNT?
An SNT can be created by parents, grandparents, legal guardians, or the court. In some cases, the individual with special needs can also create a trust using their own assets (usually called a first-party SNT).

Q: What are the main types of Special Needs Trusts?
There are two main types:

First-Party SNT – Funded with the beneficiary’s own assets (e.g., an inheritance or legal settlement). 

Third-Party SNT – Funded by family or friends.

Q: Can a Supplemental Needs Trust be used for issues beyond disability?
Yes. SNTs are commonly used for beneficiaries with physical or intellectual disabilities, but they can also be used to support individuals struggling with addiction or mental health conditions where direct access to funds might be harmful.

Q: What can SNT funds be used for?
SNT funds can cover a wide range of "supplemental" expenses, such as:
→  Personal care attendants
→  Education and tutoring
→  Medical and dental expenses not covered by Medicaid
→  Transportation
→  Travel and entertainment
→  Special therapies and equipment

Q: Can an SNT protect assets from creditors?
Yes. Especially a third-party SNT. Because the assets never belonged to the beneficiary, creditors typically cannot reach them. First-party SNTs offer some protections but may be subject to Medicaid recovery rules.

Q: Who manages the trust?

A trustee manages the SNT. This can be a family member, a trusted friend, or - in many cases - a professional or corporate trustee. Using a neutral trustee like HootOwl's Trust Service ensures the trust is managed with professionalism, neutrality, and consistency. 

Q: When should I set up an SNT?
The earlier, the better. Setting up an SNT as part of your overall estate plan ensures that your loved one will have financial support without risking the loss of public benefits — whether you are here to provide for them or not.

Planning for Peace of Mind
Every family’s situation is different. Whether you are caring for a loved one with a disability, mental health condition, or addiction challenges, HootOwl is here to help you secure their future.