Families in Illinois who care for a loved one with disabilities often face a difficult challenge: how to provide long-term financial security without jeopardizing access to essential government benefits. A Special Needs Trust (SNT) is one of the most effective estate planning tools available to address this challenge. By placing assets into a properly drafted trust, families can enhance their loved one’s quality of life while preserving eligibility for programs such as Supplemental Security Income (SSI) and Medicaid. A Special Needs Trust is a niche practice, and Koch & Associates has the experience to handle this type of complex Trust.
What is a Special Needs Trust?
A Special Needs Trust is a legal arrangement that allows assets to be set aside for the benefit of a person with disabilities. Unlike a direct inheritance or gift, assets held in an SNT are not counted as resources for purposes of government benefit eligibility. This means that a child, sibling, or adult with disabilities can continue receiving SSI, Medicaid, housing assistance, or other programs, while still benefiting from additional funds for supplemental care and lifestyle needs.
In Illinois, Special Needs Trusts are governed by both federal law and Illinois statutes. The trust must be carefully structured to ensure compliance with Social Security and Medicaid rules. Funds in an SNT can be used to pay for “extras” that improve quality of life, such as education, therapies, adaptive equipment, travel, hobbies, and entertainment—while basic needs like food and shelter remain covered by government assistance.
Types of Special Needs Trusts in Illinois
There are several different types of Special Needs Trusts recognized in Illinois, each designed for different circumstances:
- First-Party Special Needs Trust
Funded with the beneficiary’s own assets (for example, a personal injury settlement, inheritance, or savings), this type of trust must include a “Medicaid payback” provision. Upon the beneficiary’s death, any remaining funds are used to reimburse the State of Illinois for Medicaid benefits provided during their lifetime.
- Third-Party Special Needs Trust
Established by parents, grandparents, siblings, or other loved ones, this trust is funded with assets that never belonged to the beneficiary. Because the assets do not come from the person with disabilities, there is no Medicaid payback requirement. Families often create third-party trusts as part of their estate plans to provide for their child without disrupting benefits.
- Pooled Special Needs Trust
Administered by a nonprofit organization, pooled trusts combine resources from many beneficiaries for investment purposes while maintaining separate sub-accounts. This option may be beneficial when professional management and lower administrative costs are important.
Schedule an appointment with Koch & Associates in Cicero, IL., and we can help you & your family to figure out which Special Needs Trust is right for you. Contact us today!
Why Special Needs Trusts Matter in Illinois
Without a Special Needs Trust, even a modest inheritance can disqualify a person with disabilities from vital benefits. For example, if an individual receiving SSI or Medicaid were to receive more than $2,000 outright, they could lose access to coverage for healthcare, personal care assistants, or therapies. By contrast, assets placed in a properly drafted Special Needs Trust are shielded from this calculation, ensuring that benefits remain intact.
Illinois families also benefit from local resources, including nonprofit trustees and attorneys experienced in disability law. Drafting an SNT requires specialized knowledge of state and federal regulations, and a trust must be tailored to meet the beneficiary’s unique needs.
5 Key Benefits of a Special Needs Trust
- Preserves Government Benefits – Prevents disqualification from SSI, Medicaid, and other assistance programs.
- Improves Quality of Life – Provides funds for supplemental needs such as education, recreation, travel, therapies, and social activities.
- Offers Long-Term Financial Security – Ensures assets are professionally managed for the lifetime of the beneficiary.
- Customizable & Flexible – Can be designed to address unique family circumstances, including multiple beneficiaries or blended families.
- Protects Against Exploitation – Ensures that funds are controlled by a trusted trustee rather than being directly accessible to the beneficiary.
There are more benefits that are listed above. To know more about these benefits, contact Koch & Associates today to schedule an appointment.
Choosing the Right Trustee
One of the most important decisions in creating an SNT is selecting a trustee. In Illinois, trustees can be family members, trusted friends, professional fiduciaries, or nonprofit organizations that administer pooled trusts. The trustee is responsible for making distributions, managing investments, filing taxes, and ensuring that trust expenditures comply with benefit eligibility rules.
Because trustee responsibilities are complex, many families choose to work with attorneys and financial professionals to guide both the drafting and ongoing administration of the trust.
Establishing a Special Needs Trust in Illinois
Creating a Special Needs Trust involves careful planning and legal expertise. At Koch & Associates, we will do the following for an SNT:
- Analyze the beneficiary’s current and future needs.
- Determine which type of trust (first-party, third-party, or pooled) is most appropriate.
- Draft trust documents that comply with Illinois and federal regulations.
- Assist in selecting and advising trustees.
- Coordinate with other estate planning tools, such as wills, guardianships, and powers of attorney.
Families often include SNTs as part of a comprehensive estate plan to ensure that their loved one will be protected well into the future. A Special Needs Trust in Illinois is more than just a legal document; it is a lifeline for individuals with disabilities and their families. It ensures that loved ones can receive inheritances, gifts, or settlements without losing access to vital public benefits. By working with an experienced Illinois attorney, families can create a tailored plan that protects resources, enhances quality of life & provides peace of mind for years to come.
