A special needs trust—also known as a supplemental needs trust—is an irrevocable trust designed to provide supplemental income for a designated beneficiary who is physically disabled, mentally disabled, has chronic illness, or has other special needs and is receiving or may be eligible to receive government benefits—such as Social Security, Supplemental Security Income (SSI), Medicare, or Medicaid.

A special needs trust is often created by parents of a disabled child, with the trust prohibiting distributions from being used for the child’s food, clothing, or shelter to ensure the child (or adult) remains eligible for related government benefits. A special needs trust must be created before the beneficiary reaches the age of 65.

In Arizona, a special needs trust, also known as a supplemental needs trust, is a legal arrangement that allows individuals with disabilities to receive financial support without jeopardizing their eligibility for government assistance programs like Social Security, Supplemental Security Income (SSI), Medicare, or Medicaid. These trusts are typically established by parents or guardians for the benefit of a disabled child, but they can also be set up by other family members, friends, or even the individuals themselves if they are mentally competent. The trust is designed to provide for the extra and supplemental needs of the beneficiary, beyond what government programs cover, without supplanting those benefits. This means that the trust funds cannot be used for basic needs that are typically covered by public assistance, such as food, clothing, or shelter. To ensure the beneficiary's eligibility for government benefits is not compromised, the trust must be properly structured and adhere to both federal regulations and Arizona state law. It is important to note that the trust must be established before the beneficiary turns 65 years old. An attorney with experience in special needs planning can provide guidance on setting up and managing a special needs trust in compliance with all applicable laws.