How to Use a Special Needs Trust in Ohio

How to Protect SSI & Medicaid

Families caring for a loved one with disabilities think about the future more than most. You’re planning for dignity, stability, and continuity of care, often long after you’re gone. The very programs your loved one relies on, SSI and Medicaid, have strict asset limits. A single inheritance, settlement, or generous gift can, by accident, push them over those limits and disrupt essential benefits.

A Special Needs Trust (SNT) is the solution that restores balance. It safeguards eligibility for needs-based programs while still giving families the flexibility to provide comfort, enrichment, and long-term protection.

When built correctly, an SNT becomes the backbone of a comprehensive plan: it protects benefits, prevents financial exploitation, and ensures that resources are managed responsibly.

Why Traditional Inheritance Planning Breaks Down

For many families, the instinct is to name a disabled child or adult as a beneficiary of a life insurance policy, or to leave assets to them in a will, or to “keep things simple” by titling accounts jointly. But SSI and Medicaid treat most transfers and inheritances as countable resources. If the beneficiary exceeds the modest asset thresholds, benefits are paused or terminated, and reinstating them is rarely quick.

To preserve access to vital supports, the assets must be held in a way that benefits the person without being legally considered the person’s property. A Special Needs Trust accomplishes exactly that.

The Two Types of SNTs

Ohio recognizes two main types of Special Needs Trusts, with each suited to different funding sources and serving distinct purposes, rules, protections, and long-term implications for beneficiaries.

1. First-Party Special Needs Trusts – These trusts are used when the beneficiary receives assets directly, such as a personal injury settlement, divorce award, or an inheritance that was accidentally left to them outright. Because the funds come from the beneficiary, federal law requires strict conditions: the trust must be irrevocable, created before the beneficiary turns 65, and include a Medicaid payback clause that reimburses the state upon the beneficiary’s death. Despite the payback requirement, first-party SNTs often prevent a crisis by keeping the beneficiary eligible for SSI and Medicaid without forcing a total spend-down.
2. Third-Party Special Needs Trusts – These trusts are funded with assets belonging to someone other than the beneficiary, usually a parent, grandparent, or sibling. They offer significantly more flexibility because they do not require Medicaid reimbursement upon the beneficiary’s death. Families can decide exactly where leftover funds will go, making third-party SNTs ideal for long-term planning, multi-generational support, and creating a lasting care structure that adapts as the beneficiary’s needs change.

What an SNT Can Pay For

Many people assume a Special Needs Trust is restrictive or only for essential expenses. In reality, the opposite is true. The trust’s purpose is to supplement benefits, not replace them. That opens the door to a wide range of life-improving expenditures from therapies and caregiving support to technology, transportation, entertainment, and travel.

The trust can’t give cash directly to the beneficiary, and certain basic needs (like food or rent) must be handled carefully to avoid reducing SSI payments. But an experienced trustee can use the trust to significantly elevate the beneficiary’s comfort, autonomy, and opportunities.

A reliable trustee must understand the rules, maintain impeccable records, and make prudent, benefit-safe decisions.

How ABLE Accounts Expand Flexibility

Ohio’s STABLE accounts, our state’s version of the federal ABLE program, add a valuable layer of flexibility. An ABLE account allows eligible individuals to save and spend money on qualified disability expenses without jeopardizing SSI or Medicaid benefits.

And unlike a trust, the beneficiary can manage the ABLE account directly, giving them respect and autonomy.

A Special Needs Trust can hold larger assets and manage long-term planning. The ABLE account can cover smaller, day-to-day or housing-related expenses while minimizing SSI reductions.

Funding the Trust

Families often choose to fund SNTs using life insurance policies, investment accounts, real estate, structured settlements, or thoughtful gifting over time.

Retirement accounts can also be directed to a trust via beneficiary designations, but it’s important to plan for taxes carefully when doing so. Since non-probate transfers bypass a will, it’s important to make sure each designation correctly names the trust rather than the beneficiary directly.

The Earlier the Plan, the More Options You Keep

A common misconception is that you only need a Special Needs Trust when a crisis happens. In truth, the best outcomes come from early planning. Building trust years in advance allows families to fund it gradually, align all beneficiary designations, intentionally choose trustees, and give loved ones (and professionals) time to understand how the plan works.

Waiting for money to arrive can limit options and force families into first-party trusts with repayment requirements. The type of trust, funding strategy, trustee choice, and ABLE account should all align with your loved one’s current and future needs.

We can help you design a plan that protects SSI and Medicaid, avoids common pitfalls, and gives your family clarity and confidence.

Schedule a plan-fit call to structure the right SNT.