Special Needs Trust Planning Checklist
A step-by-step guide for Massachusetts families creating a special needs trust, from choosing the right trust type to funding, trustee selection, and long-term administration.
This checklist is provided for general educational purposes only. It is not legal advice, does not create an attorney-client relationship, and does not cover every situation. Confirm current requirements with an attorney before relying on it.
Phase 1: Choose the Right Trust Type
Determine which special needs trust structure fits your situation0 / 5
There are three main types of special needs trusts. Choosing the right one depends on whose money funds the trust and the beneficiary's age. Using the wrong type can jeopardise SSI or Medicaid eligibility.
Determine whether this is a first-party or third-party trustFirst-party (d4A): funded with the beneficiary's own assets (e.g., inheritance, personal injury settlement). Third-party: funded with family assets, typically as part of a parent's or grandparent's estate plan.
For first-party trusts: confirm beneficiary is under age 65First-party special needs trusts can only be established for individuals under 65 years of age at the time of creation.
Consider a pooled trust if a first-party trust is needed for someone 65+Pooled trusts (d4C) are administered by nonprofit organisations and are available to individuals of any age with disabilities.
For third-party trusts: decide between standalone SNT and testamentary SNTA standalone trust exists during your lifetime and can receive gifts. A testamentary SNT is created through your will and takes effect at death, appropriate for parents planning for a disabled child's future.
Confirm the beneficiary's current benefits (SSI, MassHealth, housing assistance)Document all public benefits the beneficiary currently receives. This determines the rules the trust must follow to avoid disqualification.
Phase 2: Gather Beneficiary Information
Documentation needed to draft the trust correctly0 / 6
Collect the beneficiary's full legal name, date of birth, and Social Security numberThese are required for the trust document and for any future benefit program notifications.
Obtain documentation of the qualifying disabilityFor SSI/Medicaid purposes, the disability must meet Social Security's definition. Gather medical records, SSA disability determination letters, or physician documentation.
Prepare a letter of intent (life care plan)This non-legal document describes the beneficiary's daily routine, medical needs, relationships, preferences, and long-term wishes. It guides the trustee even after you are no longer able to provide direction.
Document current and anticipated future care needs and costsEstimate the annual cost of care (therapies, medical equipment, transportation, housing, recreational activities) to inform how the trust should be funded.
Note any existing benefit award letters or case worker contactsKeep copies of current SSI award letters, MassHealth coverage letters, housing vouchers, or DDS service plans for your attorney to review.
Identify the beneficiary's residential situation and support networkNote whether the beneficiary lives at home, in a group home, or independently, and who provides daily support. This affects what the trust can and cannot pay for.
Phase 3: Choose Your Trustee
Selecting and setting up the right trustee structure0 / 5
The trustee manages the trust assets and makes all distribution decisions for the beneficiary's lifetime. This is one of the most critical decisions in the planning process. The beneficiary should never be their own sole trustee in a first-party SNT.
Identify a primary trustee (individual or corporate)Options include a family member, trusted friend, a professional fiduciary, or a corporate trust company. Consider financial ability, proximity, and longevity relative to the beneficiary.
Name a successor trustee (and an alternate)The primary trustee will not serve forever. Name at least two successor trustees in order of priority to ensure continuity of trust management.
Consider a trust protector or advisory committeeA trust protector is a person with limited power to modify the trust, replace a trustee, or adapt to law changes, a useful safeguard for a multi-decade trust.
Educate the chosen trustee on SNT rulesThe trustee must understand what the trust can and cannot pay for, particularly that direct cash payments or in-kind support for food and shelter can reduce SSI benefits.
Discuss compensation and record-keeping expectationsTrustees are entitled to reasonable compensation. Establish expectations around bookkeeping, annual accountings, and tax filing (SNTs may require annual fiduciary income tax returns).
Phase 4: Coordinate with Benefit Programs
Protecting SSI, MassHealth, and other public benefits0 / 6
A special needs trust only works if it is structured and administered correctly. Trust assets generally do not count toward SSI's $2,000 resource limit, but only if the trust document and distributions comply with strict SSA and MassHealth rules.
Confirm trust assets will not be counted as beneficiary resources for SSIA properly drafted third-party SNT is excluded from SSI resource counting. A first-party d4A trust is also excluded if it meets federal requirements. Have your attorney verify the trust language.
Understand what the trust can and cannot pay for without reducing SSISafe purchases: education, transportation, clothing, household goods, recreation, therapies, electronics. Problematic: cash payments, food, or shelter costs that substitute for SSI-funded needs.
Notify SSA when a first-party trust is establishedFirst-party (d4A) trusts must be reported to the Social Security Administration. Third-party trusts do not need to be reported unless trust distributions affect benefits.
Notify MassHealth (EOHHS) if a first-party trust is createdFirst-party SNTs must include a Medicaid payback provision and may need to be filed with EOHHS. Your attorney can handle this notification.
Explore whether an ABLE account complements the SNTAn ABLE account allows a disabled person to save up to $20,000/year (2026) without affecting SSI. The beneficiary can control an ABLE account directly, unlike an SNT. The two can be used together.
Update beneficiary designations on life insurance and retirement accountsDo NOT name the beneficiary directly on life insurance or retirement accounts. This will create a countable asset. Instead, name the special needs trust as beneficiary.
Phase 5: Fund the Trust
How and when assets flow into the trust0 / 5
Determine initial funding source and amountCommon sources: parental savings, inheritance, life insurance proceeds, legal settlement, gifts from extended family. Estimate the amount needed to fund lifetime care costs beyond what public benefits provide.
Retitle assets into the trust name (if funding during lifetime)Work with your financial institution to re-title accounts, investments, or other assets in the name of the trustee of the trust (e.g., "Jane Smith, Trustee of the [Name] Special Needs Trust").
Purchase or review life insurance to fund the trust at deathA life insurance policy naming the SNT as beneficiary is the most common way parents fund a testamentary or third-party SNT. Review coverage amounts to match projected lifetime care costs.
Coordinate with other family members who may contributeGrandparents, aunts, uncles, and siblings can contribute to a third-party SNT directly or leave assets to it through their own estate plans. Never have them leave assets directly to the beneficiary.
Update your own will and beneficiary designations to direct assets to the SNTEnsure your will, life insurance, IRAs, and other assets flow to the trust, not to the beneficiary directly, to protect their benefits.
Phase 6: Ongoing Administration
Keeping the trust effective year after year0 / 5
File annual fiduciary income tax returns (Form 1041) if requiredTrusts with income over $600 must file a federal fiduciary income tax return. Consult a CPA familiar with special needs trusts to handle annual filings.
Maintain detailed records of all trust distributionsKeep receipts, invoices, and records of every distribution from the trust. In-kind support reporting errors are one of the most common causes of SSI overpayment claims.
Review and update the letter of intent regularlyUpdate the beneficiary's life care plan whenever their health, living situation, or needs change significantly. The trustee should have a current version at all times.
Monitor changes in SSI, MassHealth, and trust lawBenefit program rules change. ABLE account contribution limits, SSI resource rules, and Medicaid requirements are periodically updated. Review the trust's compliance with an attorney every few years.
Plan for the transition when parents are no longer able to oversee the trustIdentify who will advocate for the beneficiary, communicate with the trustee, and ensure the letter of intent is followed. Consider naming a care manager or advocate in the trust document.
Your Progress
0 of 32 items completed
Sections
Trust Type
Beneficiary Info
Trustee Selection
Benefits Coordination
Fund the Trust
Administration