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 Colorado, a special needs trust (SNT), also known as a supplemental needs trust, is a legal arrangement that allows a person with a disability to receive financial benefits from the trust without affecting their eligibility for government assistance programs like Social Security, Supplemental Security Income (SSI), Medicare, or Medicaid. These trusts are designed to provide for the extra and supplemental needs of the beneficiary, beyond what the government programs cover, without disqualifying them from receiving such benefits. The trust assets can be used for a variety of life-enhancing expenditures without compromising the beneficiaries' eligibility. Colorado follows the federal guidelines for SNTs, which stipulate that the trust must be established before the beneficiary turns 65 years old. It is important to ensure that the trust is properly structured and administered to avoid any potential issues with eligibility for government benefits. An attorney with experience in special needs planning can provide guidance on setting up and managing a special needs trust in accordance with both Colorado and federal law.