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 Iowa, a special needs trust, also known as a supplemental needs trust, is a legal arrangement that allows individuals with disabilities to have funds set aside for their benefit 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 a child with disabilities, but they can also be set up by a third party or by the individual themselves if they are competent. The trust is irrevocable, meaning it cannot be easily changed or terminated once it is established. The funds in a special needs trust can be used for a wide range of life-enhancing expenditures without affecting eligibility for benefits, as long as they do not cover food, clothing, or shelter expenses, which are typically provided by government assistance. In Iowa, as in other states, the trust must be established before the beneficiary turns 65 years old. It is important to work with an attorney who specializes in special needs planning to ensure that the trust is properly set up to meet both state and federal regulations.