Special needs trusts are designed to benefit people with disabilities, to provide for special needs which public benefits do not. There are traditional common law special needs trusts and federal statutory special needs trusts.

In the United States it has been traditional to establish a common law special needs trust to benefit an heir who has a disability based on constitutional concepts of the right to will or gift property to succeeding beneficiaries. The underlying theory of common law special needs trusts is that the trust assets have never belonged to the disabled beneficiary and so are not considered to be the disabled beneficiary's property. See also Heckler v. Turner 470 U.S. 184, 200, 105 S. Ct. 1138, 84 L.Ed. 2d 138 (1985), which prohibited “imputing financial support from persons who have no obligation to furnish it or by overvaluing assets in a manner that attributes nonexistent resources to recipients.” With a special needs trust the disabled beneficiary does not control the assets. A relative or independent trustee makes disbursements to benefit the disabled beneficiary.

A federal law was passed on August 10, 1993 (called OBRA-93) concerning special needs trusts designed to benefit people who are totally and permanently disabled. Under this federal law (OBRA-93) it is the articulated policy of Congress to allow persons who have disabilities, to be the beneficiaries of a trust without becoming disqualified from receiving public benefits. The Social Security Act was amended in 1999 (42 USC 1382b(e)(5)) to make it clear that this uniform federal protection for special needs trusts included SSI eligibility in addition to medicaid eligibility. This “safe harbor” law allows three types of trusts to be established for persons who have disabilities, described respectively in subsections (A), (B) and (C) of the law. The subsection (B) trust does not apply in New Hampshire. Subsection (A) permits the following type of trust:

“(A) A trust containing the assets of an individual under age 65 [emphasis supplied] who is disabled (as defined in sec. 1614(a)(3)) and which is established for the benefit of such individual by a parent, grandparent, legal guardian of the individual [note the absence of the phrase “by such individuals” which appears at this point in the description of the subsection (C) trust set forth below], or a court if the State will receive all amounts remaining in the trust upon the death of such individual up to an amount equal to the total medical assistance paid on behalf of the individual under a State plan under this title[note the absence of the phrase “To the extent that amounts remaining in the beneficiary's account upon the death of the beneficiary are not retained by the Trust” which appears at this point in the description of the subsection (C) trust set forth below.]”

Subsection (C) is substantially different. It permits the following type of trust:

“(C) A trust containing the assets of an individual [note the absence of phrase “under age 65” which appears at this point in the description of the subsection (A) trust set forth above] who is disabled (as defined in sec. 1614(a)(3)) that meet the following conditions:

What are the differences between a subsection (A) trust and a subsection (C) trust? In contrast to a trust under subsection (A) a subsection (C) trust: (1) can be established by the disabled individual, (2) there is no age limitation and (3) funds can be retained by the trust after the death of the original disabled beneficiary. On the other hand, a subsection (C) trust requires that a non-profit association manage the trust, rather than having as trustee a family member or other person as permitted in the case of a subsection (A) trust.

Whoever the trustee is, that trustee may be able to provide individual advocacy and promote empowerment for individual beneficiary to participate to the fullest extent possible in the decision making process. The trustee should first seek to arrange funding from other sources and the provision of services from existing organizations, where possible.

What are the characteristics of a good trustee? In choosing a trustee whether a family member or independent trustee, the Court in the case of In re Quirin Estate 116 NH 845 (1976) set forth suitability characteristics. Characteristics to consider include: integrity; sound judgment; good health; solvency; intelligence; not hostile to others involved; no conflict of interest; familiarity with required procedures; prior experience as a trustee and substantial experience in managing finances particularly if large sums are involved; and acceptance by the beneficiary.