Understanding Special Needs Trusts: How to Protect Loved Ones on Public Benefits and with Disabilities

Jennifer Georgianne
Jul 6
4 min read

If you have a loved one with a disability who relies on government assistance such as SSI (Supplemental Security Income) or Medi-Cal/Medicaid, proper estate planning is critical. Leaving assets directly to a person with special needs can unintentionally disqualify them from public benefits—but with the right trust planning, you can provide for them without putting those benefits at risk.

At East County Estate Planning, PC, we assist families throughout Kirkland, Redmond, Bothell, Woodinville, Sammamish, and King County, Washington, as well as La Mesa, Santee, El Cajon, and San Diego County, California, with creating Special Needs Trusts (SNTs) that protect eligibility and ensure quality of life.

What Is a Special Needs Trust?

A Special Needs Trust is a legal structure that holds assets for a person with disabilities without interfering with their ability to qualify for means-tested government benefits like SSI or Medicaid. The assets in the trust can be used to pay for supplemental needs—those not covered by public benefits—such as:

Personal care attendants
Education
Transportation
Out-of-pocket medical or dental expenses
Vacations and recreational activities
Specialized therapy, services, or devices

These trusts give families peace of mind knowing their loved one will have financial support without losing critical assistance.

The Three Types of Special Needs Trusts

There are three main types of Special Needs Trusts, each designed for different funding sources and planning scenarios.

1. First-Party Special Needs Trust (D4A Trust)

A First-Party Special Needs Trust, also known as a D4A Trust, is funded with the beneficiary’s own assets. This might include:

A personal injury settlement
Inheritance received outright
Social Security back-pay
Assets from a divorce or child support

Key requirements:

The beneficiary must be under age 65 when the trust is established
The trust must be irrevocable
It must be established by the individual (if legally competent), parent, grandparent, guardian, or the court
Meets the SSA Definition of disability
Upon the beneficiary’s death, any remaining assets are subject to Medicaid payback

This type of trust is commonly used when a disabled individual unexpectedly receives assets that could jeopardize their benefits.

2. Third-Party Special Needs Trust (D4C or Discretionary SNT)

A Third-Party Special Needs Trust is funded with assets from someone other than the beneficiary, such as a parent or grandparent. It is the preferred type for proactive estate planning.

Key features:

There is no age restriction
No Medicaid payback is required after the beneficiary’s death
Remaining assets can pass to other family members or heirs
It can be included in a revocable living trust or created as a standalone trust

This type of trust allows families to leave an inheritance to a loved one with special needs without affecting their eligibility for benefits.

3. Pooled Special Needs Trust (D4C Pooled Trust)

A Pooled Special Needs Trust is managed by a nonprofit organization that pools the resources of many beneficiaries for investment purposes but maintains separate accounts for each individual.

This option is typically used when:

The beneficiary has no family member or friend available to act as trustee
The amount of money involved doesn’t justify the cost of creating a separate trust
The trust is funded with either first-party or third-party funds

Pooled trusts still preserve public benefit eligibility and offer professional trust management, but they do typically require a portion of any remaining assets to stay with the nonprofit after the beneficiary’s death.

Why Special Needs Trusts Are So Important

Many public benefit programs have strict asset and income limits—for example, SSI beneficiaries can only own up to $2,000 in countable resources. If a well-intentioned family member leaves them money directly, they could be disqualified from assistance programs they rely on for housing, medical care, and daily living support.

A properly drafted Special Needs Trust ensures:

Public benefits remain intact
Funds are used to improve quality of life
Long-term care planning is in place
Family members have peace of mind

State Law Differences in California and Washington

Both California and Washington follow federal guidelines on Special Needs Trusts but may differ in how local agencies interpret trust distributions. In California, for example, Medi-Cal may be more aggressive in evaluating trust expenditures. In Washington, Medicaid is administered through Apple Health, which can vary by county.

Our firm ensures your trust complies with local requirements in San Diego County, CA, and King County, WA, while protecting your loved one from unnecessary risk.

Protect Their Future—Start Planning Now

If someone you love relies on SSI, Medicaid, or other benefits, don’t leave their future to chance. At East County Estate Planning, PC, we draft customized Special Needs Trusts to fit your family’s needs—whether you’re planning ahead or responding to an urgent situation.

Serving Clients in:

Washington: Kirkland, Redmond, Bothell, Woodinville, Sammamish, King County
California: La Mesa, Santee, El Cajon, San Diego County

📞 Contact us today to schedule a consultation and safeguard your loved one’s future with the right trust plan.

Office Locations

📞 Call us today at (619) 566-8084 or visit www.ecestateplanning.com to schedule your free consultation.

Disclaimer: The information provided in this blog is for general informational purposes only and does not constitute legal advice. Reading this blog or contacting our firm through this website does not create an attorney–client relationship. You should not act or refrain from acting based on any content included in this blog without seeking appropriate legal or other professional advice specific to your situation.