## Special needs trusts in Massachusetts **Special Needs Trusts (SNTs)** — also called Supplemental Needs Trusts — are designed to provide for individuals with disabilities WITHOUT disqualifying them from means-tested government benefits like SSI, Medicaid, and Section 8 housing. ## Why SNTs matter Means-tested government benefits have asset limits: - **SSI** — $2,000 individual / $3,000 couple - **Medicaid** — typically $2,000 in many states - **Section 8 / public housing** — income-based Without an SNT, even a modest inheritance can disqualify someone from these benefits — often costing more in lost healthcare than the inheritance itself was worth. ## Three main types of SNTs **1. First-party / self-settled SNT (d4A trust).** Funded with the disabled person's OWN money: - Personal injury settlement - Inheritance directly to the disabled person - Wages saved before disability - Medicaid payback required at death (federal law: 42 U.S.C. § 1396p(d)(4)(A)) - Beneficiary must be UNDER 65 when established - Must be disabled per Social Security definition - Established by parent / grandparent / guardian / court / individual **2. Third-party SNT.** Funded by SOMEONE ELSE'S money — typically parents, grandparents, or other family for the disabled person's benefit: - NO Medicaid payback - Remainder distributed to other beneficiaries at death (other family) - More flexible than first-party - The default planning vehicle for parents with disabled children **3. Pooled trust (d4C trust).** Run by a non-profit organization that pools multiple beneficiaries' funds: - Lower administration costs - Professional management - Suitable for smaller amounts - Can be self-funded or third-party - Medicaid payback may be required (varies) - Each beneficiary has separate sub-account ## What SNT funds CAN typically pay for **Quality-of-life expenses:** - Vacations and travel - Entertainment, hobbies, activities - Education and training - Recreation equipment - Companionship services - Specialized therapies not covered by Medicaid - Pets and pet care - Memberships and subscriptions - Cell phone and internet - Transportation (vehicles, ride-sharing) - Adapted technology - Insurance premiums (life, disability, supplemental health) - Funeral / burial expenses (pre-paid) - Legal and accounting fees ## What SNT funds typically should NOT pay for **Things that count as "in-kind support and maintenance" reducing SSI:** - Food - Shelter / rent / mortgage - Utilities - Property taxes - Cash distributions to beneficiary These are sometimes paid with reduced SSI if absolutely needed; but careful planning treats them as last resort. The 2024 SSA rule changes loosened some food restrictions but utilities and shelter still problematic. ## Trustee selection Critical decision. Options: - **Professional trustee** (bank, trust company, attorney) — best for large trusts - **Family member** — simpler / cheaper but emotionally complex - **Co-trustees** — combine professional management + family input - **Pooled trust trustee** — non-profit organization for smaller trusts Trustee fees typically 1-2% of trust assets annually for professionals; 0.5-1% for pooled trusts. ## Funding options Common ways to fund a third-party SNT: **During lifetime:** - Cash gifts - Real estate transfers - Stock / business interests - Insurance policies (with SNT as beneficiary) **At death (testamentary funding):** - Bequest in will - Beneficiary designation on retirement account - Beneficiary designation on life insurance - Designation on annuity **Don't make** the disabled beneficiary a direct beneficiary of life insurance / retirement / will — funds go to them and disqualify benefits. Make the SNT the beneficiary. ## Letter of intent Beyond the legal SNT document, families should prepare a **Letter of Intent** describing: - The beneficiary's preferences, needs, and history - Daily routines - Medical providers - Educational background - Trusted advisors - Religious / cultural preferences - Final wishes Letter of intent guides trustees but isn't legally binding. ## ABLE accounts as alternative / supplement **ABLE accounts** (529A) — separate vehicle: - For people whose disability began before age 26 (raised to 46 in 2026 under SECURE 2.0) - Up to $19,000/year contributions (2025) - Up to $100K does NOT count for SSI - Can be used for qualified disability expenses - Often used alongside SNT for separate categories of expenses ## Common mistakes - **Direct inheritance** to disabled person (disqualifies benefits) - **Naming wrong beneficiary** on retirement / life insurance - **Funding too late** — emergency planning is harder - **Wrong trustee** — family member without expertise / time - **Failing to update** as laws / circumstances change - **Ignoring tax issues** — SNTs have complex tax treatment - **Inappropriate distributions** — paying for food / shelter without analysis ## Coordination with public benefits Trustees of SNTs need ongoing knowledge of: - SSI rules (income / resource tests) - Medicaid rules (vary by state) - Section 8 / housing rules - VA benefits (if applicable) - State-specific Medicaid waivers Mistakes can result in benefit overpayments, demands for repayment, and disqualification. ## What you should do Special needs planning requires specialized counsel — not just any estate-planning attorney. Look for Massachusetts attorneys who are members of the Special Needs Alliance or the Academy of Special Needs Planners. Most offer paid initial consultations. Cost of comprehensive SNT planning ($2,500-$10,000+) is far less than the cost of losing government benefits or mismanaging the trust. --- *This guide is general information about Massachusetts and federal SNT law as of early 2026 and is not legal advice. SNT law is technical and benefit rules change. Talk to a licensed Massachusetts special-needs attorney about your specific situation.*