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There are several different types of trusts that can be used to enhance the quality of life for a trust beneficiary with special needs.  These trusts generally supplement benefits that the beneficiary receives through public assistance programs, such as Supplemental Security Income (SSI) and Medicaid.  As supplemental needs trusts, or special needs trusts, there are certain items that trust funds cannot be used to pay, such as food and shelter.  The reason for this is that the beneficiary’s public assistance programs are intended to pay for food and shelter.  However, in spite of these narrow exceptions for trust distributions, the trusts can be used for a wide range of purposes.

Some examples of how funds in a properly created special needs trusts can be used are for medical treatment and medication that are not otherwise covered through Medicaid, attendant care for non-medical services, education expenses, vehicle with modifications, travel, and entertainment.  These are just a few examples.  There are literally innumerable ways that funds in the trusts can be used.

Special needs trusts are often distinguished by the manner in which they are created and funded.  Colorado's Medicaid regulations require that any trust that is created for the benefit of a Medicaid beneficiary be submitted to the state Medicaid agency for review and approval.  The type of trust determines the provisions that it must contain to comply with Medicaid regulations and SSI criteria.  There are five trusts generally used in special needs planning.  They are (1) disability trusts, (2) pooled trusts, (3) third party discretionary trusts, (4) testamentary special needs trust, and (5) income trusts.

The following is a discussion of the aforementioned trusts used in special needs planning in Colorado.