When a person with a disability in Oregon uses benefits such as SSI or Medicaid, there’s a cutoff. If that person has $2,000 in assets in their name, they could lose access to their benefits, and may even be on the hook to pay back funds. Fortunately, there’s a way around that: a Special Needs Trust, or SNT.

Need to plan for someone in your life who has a disability?

Legal workaround for assets

The SNT is a way to hold assets for a person who has a disability, without those assets counting against their benefit eligibility.

The person with a disability becomes the beneficiary of the SNT. They aren’t allowed to directly access funds or assets themselves. However, in Oregon, a nonprofit, family member, or professional can be designated as a trustee. That trustee can disburse funds. The beneficiary can also request disbursements, and the trustee can determine whether or not to grant that request.

What an SNT can’t pay for

An Oregon SNT is a powerful legal tool, and it’s a key way to provide a better quality of life for a person who has a disability. However, it’s not allowed to fund certain things, such as (but not limited to):

• Rent, mortgage payments, or property fees (such as HOA fees, condo fees, property taxes, etc.)
• Utilities
• Food
• Cash in hand to beneficiary

That’s right. SNT’s aren’t allowed to pay for basics-of-life costs such as these.

What an SNT can do

Instead, an SNT is intended to cover costs that provide opportunities or fund therapies beyond what benefits cover, such as:

• Equipment and devices
• Therapies, rehabilitation, and/or treatments
• Services and/or equipment not covered by state/federal benefits
• Education
• Entertainment
• Transportation services (bus, rideshare, etc.)
• Vehicle
• Companion
• Travel/vacations
• Home furnishings
• Legal expenses
• Electronics
• Education and training
• Insurance
• Burial expenses

In other words, while an SNT isn’t allowed to pay a beneficiary’s rent, it can pay for a trip away. Or it can fund a car, an entertainment subscription, or equipment that can improve quality of life, but isn’t covered by the beneficiary’s state or federal benefits.

2 main types of SNT, plus alternatives

A grantor establishes an SNT, and a trustee manages the SNT, for the benefit and welfare of the beneficiary. Legally, the trust is a separate legal entity from the beneficiary and those funding the trust. Part of setting up the SNT will also mean getting the trust its own federal taxpayer ID number.

When you consider using an SNT to help a person who has a disability, there are two main types to consider:

First-party SNT

The person with a disability is called the “first party.” A first-party SNT gets funded with assets in the beneficiary’s name. A common source for such funds could be a financial settlement from an injury lawsuit, for example, as well as savings or an inheritance.

Under a first-party SNT, the beneficiary could benefit from the assets throughout their life. Typically, upon death, the remaining assets would be paid out to Medicaid, as reimbursement for the services provided.

Third-party SNT

If the person with a disability doesn’t have the assets to fund a special needs trust in Oregon, the third-party SNT allows others to fund the trust for the beneficiary. Those assets could come from a spouse, parents, family members, or others who care about the person’s welfare and want to provide for them.

In this case, the person provided the funds potentially could be named as the trustee too, providing funds and management together.

Third-party SNTs can be funded with assets such as:

• Savings accounts
• Real estate
• Investments (e.g., stocks and bonds)
• CDs
• IRAs
• Life insurance proceeds
• Inheritances (typically a will would designate the trust, not the beneficiary, so as to prevent benefit eligibility problems)

A key difference: When the beneficiary dies, the trust assets are not required to be disbursed to Medicaid. Instead, the trust can distribute funds to named beneficiaries.

Special for Oregon: The Oregon Special Needs Trust (OSNT)

In situations where neither a third-party or first-party SNT could apply or be possible, the person with a disability could gain benefits by being part of the Oregon Special Needs Trust, or OSNT.

Since 1999, OSNT has been an option for Oregon residents with qualifying disabilities, whether or not they are receiving benefits. OSNT is also approved by both Oregon DHS and the SSA.

A key benefit? OSNT can be cheaper and more streamlined to set up than private trusts. However, the people funding the trust do not have a say in managing the trust or how funds are disbursed, or not disbursed, for the beneficiary.

OSNTs are overall pooled accounts, where each beneficiary has their own individual sub-account. Typical fees include enrollment, any necessary legal fees, as well as annual fees for administration and maintenance.

ABLE account

Another option is the Achieving a Better Life Experience account, or ABLE. In order to qualify, the person’s disability must have happened before they turned 46 years old.

ABLE accounts generally have a lower setup cost than trusts. The beneficiary also can directly control the account and how the funds are used. Earnings are tax-free, but contributions have an annual $20,000 cap, and the overall account has a lifetime maximum of $400,000.

However, ABLE accounts come with more flexibility. In addition to being under the control of the beneficiary, the funds can also cover basic living costs, education, and employment-related expenses—without affecting benefit eligibility.

SNTs and ABLE accounts aren’t mutually exclusive, either. A person with a disability could be part of each. Plus, Oregon Medicaid is restricted from claiming reimbursement from an ABLE account after the beneficiary dies.

Trustees have a fiduciary duty to the beneficiary

Whatever the type of SNT, the trustee takes on a fiduciary. In other words, they have a legal and moral obligation to act in the best interests of the beneficiary. They also have a responsibility to manage the trust properly, including:

• Managing assets and disbursements
• Filing tax returns
• Maintaining accurate records
• Providing periodic accounting

When setting up the SNT in Oregon, the grantor needs to name not only a trustee, but a successor trustee, in the event that the trustee dies, becomes incapacitated, or no longer serves as a trustee. Often the grantor will designate a non-profit as the successor trustee.

You can get started today on protecting the welfare and quality of life of a person with a disability

For SNTs and ABLE accounts, you’ll want to consult with an Oregon attorney with experience in setting up trusts. Also consider the costs, benefits, and circumstances for which Oregon special needs trusts can be best for the beneficiary’s situation.

People with disabilities can benefit from special needs trusts without negating their benefits and eligibility. And you can get started today on helping to protect that person’s welfare and quality of life: