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 South Dakota, a special needs trust (SNT), also known as a supplemental needs trust, is a legal arrangement that allows individuals with disabilities to have financial resources 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 designed to provide for the extra and supplemental needs of the beneficiary, beyond what government benefits cover, without disqualifying them from receiving such benefits. The trust assets can be used for a variety of life-enhancing expenditures without compromising the beneficiary's eligibility. South Dakota follows the federal guidelines for SNTs, which stipulate that the trust must be irrevocable and must be established before the beneficiary turns 65. The trust should not provide for basic needs that are covered by government programs, such as food, clothing, or shelter, to avoid affecting the beneficiary's eligibility for those programs. It is important to set up an SNT correctly and to understand both state and federal regulations, so consulting with an attorney experienced in special needs planning is advisable to ensure compliance and to tailor the trust to the beneficiary's specific situation.