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 Vermont, a special needs trust (SNT), also known as a supplemental needs trust, is a legal arrangement that allows a person with a disability to benefit from assets held in the trust without jeopardizing their eligibility for government assistance programs such as 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. Vermont follows the federal guidelines for SNTs, which stipulate that the trust must be irrevocable, must be established for the benefit of an individual under 65 years of age who is disabled as defined by the Social Security Administration, and must be created by a parent, grandparent, legal guardian, or a court. It is important to set up an SNT correctly to ensure compliance with both state and federal laws, and it is advisable to work with an attorney who specializes in special needs planning to establish and manage the trust.