A Special Needs Trust—often called a Supplemental Needs Trust—is about ownership, of decisions, of planning, of your child’s future when you are gone. Public benefits like Supplemental Security Income and Medicaid are means-tested. That means the government looks at what your child owns. If your child owns too much, benefits stop. For SSI, the general resource limit is two thousand dollars. It isn’t much money.
So the rule is simple. If your child owns the money, it counts. If the trust owns the money, and the trust is drafted correctly, it usually does not.
That distinction is important.
The First Mistake Families Make
Most families make their first mistake without realizing it. A grandparent leaves ten thousand dollars outright to a disabled grandchild. Or a life insurance policy names the child directly as beneficiary. The check arrives. It feels like help. Then SSI is suspended. Medicaid is questioned. You are suddenly fixing a problem instead of planning ahead.
Ownership first. Always.
Three Kinds of Special Needs Trusts
There are three main kinds of Special Needs Trusts, and the right one depends on one question: whose money is it?
If the money belongs to you—parents, grandparents, relatives—you use what is called a third-party Special Needs Trust. This is usually built into your estate plan. Your will or revocable trust says that if assets pass for your disabled child, they go into that Special Needs Trust instead of directly to the child. This type of trust is flexible. It does not require Medicaid payback at your child’s death, assuming it is funded only with third-party money. You can choose remainder beneficiaries. You control the design.
If the money belongs to your child already—maybe from a personal injury settlement, back Social Security benefits, or an inheritance that was left outright—then the rules tighten. The law allows what is called a first-party Special Needs Trust. It must be for a disabled person. It must be established before age sixty-five. It must be irrevocable. And it must include a Medicaid payback clause. When your child dies, the state is reimbursed from what remains, up to the amount Medicaid paid.
There is also a pooled trust option, administered by a nonprofit. Think of it as joining a larger trust program. Your child has a sub-account, but the master trust is run by professionals who handle compliance and distributions. For some families—especially where the trust balance is modest or there is no suitable individual trustee—this can make sense. It comes with fees. It also comes with structure and experience.
Again, the first question is ownership.
Daily Administration Is Where Benefits Are Lost
Drafting the trust is only half the story. Administration is where benefits are lost.
A Special Needs Trust is designed to supplement, not replace, public benefits. That phrase matters. The trust can pay for things that improve quality of life—therapy not covered by insurance, specialized equipment, travel, education supports, a better wheelchair than Medicaid will approve, a computer, advocacy services.
What the trust should not do casually is hand cash to the beneficiary. Cash is usually treated as income for SSI purposes. That reduces or eliminates the SSI payment.
Housing is another pressure point. If the trust pays rent, mortgage, property taxes, or utilities, SSI may be reduced because that support counts as in-kind support. Sometimes families accept that tradeoff. Stable housing may be worth a reduced SSI check. But it should be intentional.
Food used to be treated the same way. Under current rules, food no longer triggers the same in-kind support calculation that shelter does. That was a significant change. Still, the broader principle holds: every distribution has consequences. For smaller, day-to-day qualified expenses, many families find that a MO ABLE account works alongside the trust—handling routine spending while the trust manages larger assets.
Trustee Selection Is Operational, Not Ceremonial
This is why trustee selection is not a ceremonial decision. It is operational.
Under Missouri trust law, a trustee has a duty of loyalty. They must act solely in the beneficiary’s interest. They must act prudently. They must keep records. They must respond to reasonable requests for information. That sounds obvious until you imagine a sibling serving as trustee while raising their own children, working full time, and trying to interpret SSI policy manuals at ten at night.
Some families choose a family trustee. That can work well when the person is organized, disciplined, and willing to learn the rules. Others choose a professional trustee or a pooled trust administrator. That brings experience and continuity, but also fees.
There is no universal right answer. There is only the question: who will actually do this work for the next forty years?
The Age-18 Transition and Court Involvement
At eighteen, your child becomes a legal adult. You no longer have automatic authority to make medical or financial decisions. If your child has capacity to sign documents, a Durable Power of Attorney should be in place before that birthday. If your child lacks capacity, you may need to pursue guardianship or conservatorship through the Missouri probate court. That is a separate legal process. It intersects with trust planning but is not the same thing.
If there is a settlement for a minor—say a personal injury recovery—court approval is usually required. That often means coordinating the settlement approval and the creation of a compliant first-party Special Needs Trust at the same time. The money should not simply be paid to the child and fixed later.
These transitions come quickly. Sixteen turns into eighteen in a blink. Planning needs to happen before the check arrives, before the birthday, before the crisis.
Questions to Ask an Attorney
When families look for an attorney to help with this, there are some blunt questions worth asking. How many Special Needs Trusts have you drafted in the last year? How do you handle Medicaid payback language for Missouri residents, especially if the beneficiary has lived in more than one state? Do you provide written guidance to trustees about distributions and benefit compliance? Will you review our beneficiary designations to make sure assets actually flow into the trust?
You are hiring someone to design a system that protects your child’s eligibility and dignity. This is something you take the time to get right.
Cost Considerations
A third-party Special Needs Trust integrated into an estate plan is often comparable to other revocable trust planning, sometimes with an additional drafting fee. A first-party trust is usually more complex, especially if court involvement is required. Pooled trusts have enrollment fees and annual administration fees, often calculated as a percentage of assets.
But compare that to the cost of losing Medicaid coverage. Or the cost of reconstructing eligibility after an inheritance was mishandled. Prevention is almost always cheaper than repair.
The Moral Center of This Planning
This is not about gaming the system. It is about recognizing that public benefits have rigid rules and building within those rules so your child can have stability and a fuller life. The trust is a structure. It holds resources so your child does not have to hold them directly.
When you leave money outright to a disabled child, you hand them ownership and risk. When you leave it to a properly drafted Special Needs Trust, you hand them support without disqualification.
That difference is quiet. It does not feel dramatic in the moment you sign documents. But it is decisive.
Plan early. Ask hard questions. Choose a trustee who can actually do the job. And never let a well-intentioned inheritance become the reason your child loses the benefits that keep them secure.
Presentation Slides
Securing Special Needs Futures
