Special needs trusts (also known as "supplemental needs" trusts) are an important component of planning for a disabled child (even though the child may be an adult by the time the trust is created or funded).
These trusts allow a disabled beneficiary to receive inheritances, gifts, lawsuit settlements, or other funds and yet not lose her eligibility for certain government programs, such as Medicaid or Supplemental Security Income (SSI). The trusts are drafted so that the funds will not be considered to belong to the beneficiary in determining her eligibility for public benefits.
Special needs trusts are designed not to provide basic support, but instead to pay for comforts and luxuries that could not be paid for by public assistance funds. These trusts typically pay for things like education, recreation, counseling, and medical attention beyond the simple necessities of life.