Special needs trust is a specialized irrevocable trust designed to hold assets for the benefit of a person with a disability without disqualifying them from means-tested government benefits such as Supplemental Security Income or Medicaid. The trust is structured so that the beneficiary has no direct control over assets, and distributions are made at the trustee's discretion to supplement, rather than replace, public assistance. Special needs trusts can be funded with family assets, personal injury settlements, or life insurance proceeds and must be drafted to meet federal and state requirements. They play a crucial role in protecting vulnerable individuals while preserving eligibility for critical medical and support services.

Advisors collaborate with elder law and special needs attorneys to create special needs trusts for children or relatives with disabilities. Life insurance is a common funding vehicle, with parents purchasing policies owned by or payable to the trust to provide long-term support after their deaths. Advisors help families estimate lifetime care costs, coordinate beneficiary designations, and avoid leaving assets outright to the disabled individual. They also educate trustees about appropriate use of trust funds, emphasizing that distributions should enhance quality of life rather than supplant government benefits. Understanding special needs trusts allows advisors to craft plans that address financial security, legal compliance, and family dynamics for some of the most fragile beneficiaries.