Special Needs Trust | Life Insurance for Disabled Dependents

A special needs trust (SNT) — also called a supplemental needs trust — allows you to leave money or assets to a loved one with a disability without disqualifying them from government benefits like Medicaid and Supplemental Security Income (SSI). Life insurance is one of the most common and effective ways to fund an SNT.

Why a Special Needs Trust Matters

Government benefit programs like Medicaid and SSI have strict asset limits. If a person with a disability inherits money outright — even a modest amount — they can lose their eligibility for these critical programs. A properly structured special needs trust holds and manages assets for the beneficiary’s benefit without counting against those limits.

How Life Insurance Funds an SNT

Life insurance is an ideal funding vehicle for a special needs trust because:

• It provides a guaranteed, income-tax-free lump sum at your death — regardless of what other assets remain
• The death benefit passes directly to the trust, bypassing probate
• It’s cost-effective — a relatively small annual premium can create a large fund for lifetime care
• It can be structured to provide for the SNT even if you exhaust other savings during your lifetime

What the Trust Can Pay For

A special needs trust can supplement — but not replace — government benefits. Common permissible expenses include:

• Personal care items not covered by Medicaid
• Education, training, and recreational activities
• Transportation and vehicle modifications
• Technology and communications
• Travel and entertainment
• Legal and financial services