A Special Needs Trust (SNT) is a legal tool that lets a person with a disability keep essential government benefits like SSI and Medi‑Cal while still receiving financial support for a better quality of life. It works by holding assets outside the beneficiary’s name so they don’t count toward strict resource limits.

Below is a clear, structured guide tailored for California (where you practice), incorporating the latest rules and distinctions.

What a Special Needs Trust Is

A Special Needs Trust (SNT) is a specialized irrevocable trust designed to **supplement—not replace—**government benefits such as:

SSI (Supplemental Security Income)
Medi‑Cal (California Medicaid)

The trust pays for extra needs that improve the beneficiary’s life, while SSI/Medi‑Cal continue covering basic food, shelter, and medical care.

The Two Main Types of SNTs

1. Third‑Party Special Needs Trust

Funded with someone else’s money (parents, grandparents, siblings, etc.).

No Medi‑Cal payback at death.
No age limit for creation.
Ideal for estate planning.

2. First‑Party (Self‑Settled) Special Needs Trust

Funded with the beneficiary’s own assets, such as:

Personal injury settlement
Inheritance received directly
Back‑pay benefits

Key rules:

Beneficiary must be under 65 when the trust is created.
Medi‑Cal payback is required at death.
In California, court approval is required (Probate Code §3604).

What an SNT Can Pay For

The trust can pay for almost anything that benefits the disabled person as long as it follows the “sole benefit rule.”
Examples include:

Medical and dental care not covered by Medi‑Cal
Therapies, caregiving, in‑home support
Education, tutoring, vocational training
Transportation, including adapted vehicles
Vacations, recreation, hobbies
Electronics, furniture, clothing
Housing costs (with SSI considerations)

Important: Trustees must avoid direct cash payments to the beneficiary, and must understand how payments for food/shelter affect SSI. (California changed some rules in 2024, making food payments more flexible.)

📍 California‑Specific Rules You Should Know (2026)

Medi‑Cal Asset Limits Are Back

As of January 1, 2026, Medi‑Cal reinstated asset limits:

$130,000 for an individual
$195,000 for a couple
Assets inside a properly drafted SNT do not count.

California’s New 30‑Month Look‑Back (2026)

Applies only to nursing facility Medi‑Cal, not community‑based services.
Transfers during 2024–2025 are exempt.

Court Oversight & Accounting

California requires trustees to provide full accountings under Probate Code §16062.

Spending Rules Are Tightening

California has clarified spending guidelines to ensure:

No duplication of Medi‑Cal/SSI benefits
Proper documentation
Beneficiary involvement where possible

Why Families Use SNTs

A Special Needs Trust helps ensure:

Long‑term financial security
Preservation of benefits
Protection from exploitation
Structured, supervised use of funds
Estate planning continuity

For California families, SNTs are especially powerful because Medi‑Cal is generous, and the Lanterman Act guarantees services through Regional Centers.

Quick Comparison Table

Feature	Third‑Party SNT	First‑Party SNT
Funding Source	Family/friends	Beneficiary’s own assets
Medi‑Cal Payback	❌ No	✔️ Yes
Age Limit	None	Must be < 65
Court Approval	Not required	Required in CA
Best Use Case	Estate planning	Protecting inheritance/settlement