What’s the Difference Between ‘Supplemental’ and ‘Special’ Needs Trusts?
You may have heard the
terms "special" needs trust and "supplemental" needs trust and wondered
what the difference is. The short answer is that there's no difference.
Here's the long answer.
the field of special needs planning began some two decades ago, trusts
created for people with disabilities were generally called supplemental
needs trusts. The thinking was that the purpose of the trusts was to supplement
the assistance provided by Medicaid, Medicare, Social Security,
Supplemental Security Income and other public benefits programs whose
level of support is meager at best.
passage of the OBRA legislation in 1993 authorizing the creation of
self-settled trusts under 42 USC 1396p(d)(4)(A), some practitioners
called for distinguishing between these new trusts and third-party
trusts often created by a parent, by calling the former special needs
trusts and continuing to call the latter trusts supplemental needs
trusts. But this approach never really caught on.
over time both types of trusts have come under the rubric of special
needs trusts and the term supplemental needs trust has fallen away. The
term special needs trust refers to the purpose of the trust to pay for
the beneficiary's unique or special needs. In short, the title is
focused more on the beneficiary while the name supplemental needs trust
addresses the shortfalls of our public benefits programs.
Special needs trusts now encompass both traditional third-party trusts and those under OBRA,
which are often known as (d)(4)(A) trusts referring to the statute or
as pay-back trusts referring to the feature that any funds remaining in
the trust at the beneficiarys death must be used to reimburse the state
Medicaid agency, or as self-settled trusts referring to the fact that
these trusts are created with the Medicaid beneficiarys own funds.
needs trusts created with someone elses funds, whether a parent,
grandparent, or someone else, are often referred to as third-party
special needs trusts.
the reference to the trusts as supplemental needs trusts rather than
special needs trusts is something of a survival. But whats in a name?
Whether supplemental or special the trusts serve the same purpose of
helping meet the needs of individuals with disabilities while still
permitting them to qualify for vital public benefits programs.