Full Definition

A special needs trust (SNT) is a legal trust designed to hold assets for a person with a disability while preserving their eligibility for Medicaid, Supplemental Security Income (SSI), and other means-tested public benefits that have strict asset limits.

Without an SNT, a disabled person who receives an inheritance, personal injury settlement, or large gift would typically need to spend those funds down to near-zero before qualifying (or re-qualifying) for Medicaid. An SNT allows those assets to be held in trust for the beneficiary’s use — for supplemental needs like education, transportation, recreation, or private care — without counting toward benefit eligibility.

Three main types exist: first-party SNTs (funded with the disabled person’s own assets, often from a personal injury settlement), third-party SNTs (funded by family or others, typically through estate planning), and pooled trusts (managed by nonprofit organizations for those without a family trustee).

For Texas seniors who are both disabled and facing Medicaid planning, an SNT may allow them to protect assets received from a lawsuit or inheritance while remaining Medicaid-eligible for long-term care. SNTs must be carefully drafted by an elder law attorney to meet federal and state requirements.