Receiving a financial settlement or lump-sum payment can be life-changing for an individual with special needs. While it may provide a path toward financial security, it also comes with significant challenges. Without careful planning, these funds could unintentionally disqualify the beneficiary from essential government programs like Medicaid and Supplemental Security Income (SSI). A First-Party Special Needs Trust (SNT) helps protect both the beneficiary’s financial future and their continued access to needs-based benefits by ensuring funds are managed in compliance with benefit regulations.
Balancing financial security and essential benefits.
For one family, a settlement was awarded to help cover the lifelong care needs of their youngest child, who experienced an injury at birth. While this financial support was critical, it also created immediate challenges that required careful planning.
Upon receiving the assets of the settlement, the child’s parents were unsure how to allocate the funds to provide for both short-term needs and long-term financial security. They wanted to use part of the settlement to fund home modifications and adaptive equipment, but they needed to ensure these payments were structured correctly to avoid violating Medicaid or Supplemental Security Income (SSI) eligibility.
The parents turned to a legal and financial team to explore their options. Their attorney recommended a First-Party Special Needs Trust to manage the funds, protect benefits, and ensure the child’s needs were met over their lifetime.
“Their child is awarded the settlement and the parents know that the money belongs to their child. The parents, however, must balance care and support for their child and for the rest of their family while protecting assets for their child’s future.”
Michelle Diamond, Chief Development Officer, Cumberland Trust
Key Challenges
Risk of Losing Government Benefits
Without proper planning, the child’s eligibility for Medicaid and Supplemental Security Income (SSI) could be jeopardized, disrupting essential care.
Managing a Large Settlement Responsibly
The family was unfamiliar with handling significant wealth and needed guidance to ensure financial stability for their child’s lifetime.
Balancing Immediate Needs with Long-Term Care
The parents had to provide for their child’s home, medical care, and daily needs while preserving resources for the future.
Solutions
Recognizing the complexities of managing a First-Party Special Needs Trust (SNT) and ensuring compliance with benefit regulations, the family partnered with their financial advisor and Cumberland Trust as their corporate trustee. This provided them with experienced financial planning and trust administration support, guiding them as they navigated critical financial decisions. With a dedicated team of specialists focused solely on Special Needs Trust administration, Cumberland Trust offered the support needed to manage this complex area effectively.
By overseeing First-Party SNT distributions, Cumberland Trust ensured that the child remained eligible for essential public benefits, including Medicaid and Supplemental Security Income (SSI). The trust preserved access to medical care, therapies, in-home care, and other long-term care options without the risk of disqualification from needs-based public benefits. Additionally, Cumberland Trust helped the family structure trust distributions to comply with regulations, allowing funds to be used for home modifications and supportive medical equipment—all while protecting public assistance eligibility.
Beyond addressing immediate financial concerns, the trust provided long-term financial oversight, ensuring that the settlement funds would be maximized to support the child’s needs over a lifetime. The family and their service providers also collaborated with Cumberland Trust to develop a comprehensive care plan, considering medical, housing, and daily care needs for both the present and the future.
With Cumberland Trust as a partner, the family received ongoing guidance in making informed financial decisions, from covering daily care expenses to planning for long-term stability. What once felt overwhelming became a structured, secure plan that provided peace of mind for years to come.
Preserving Essential Benefits
Proactive planning ensured the child remained eligible for Medicaid and Supplemental Security Income (SSI), protecting access to vital healthcare, therapies, and support services.
Medicaid Payback Considerations & Planning
Cumberland Trust helped the family develop a thoughtful strategy for balancing distributions and preserving benefits, while accounting for Medicaid payback requirements of First-Party SNTs.
Structured Spending & Long-Term Sustainability
By carefully managing funds for home modifications, medical equipment, therapies, and daily care needs, the trust maximized resources while ensuring long-term financial stability.
Twenty million U.S. families are caring for individuals with disabilities.
Cumberland Trust has a strong corporate commitment to this area of trust administration, and we are a national leader in exceptional Special Needs Trust administration. With a team of responsive trust officers focused and dedicated to Special Needs Trust administration, we provide attentive care.
Special Needs Trust Administration Services
- We become long-term partners for families and beneficiaries in the administration of their trust.
- We can connect clients with specialists to help navigate public benefits.
- We help plan future goals and needs alongside the beneficiary’s team of advisors.
- We serve as a first point of contact for the trust.
“One in five families will need support in caring for an adult or child with special needs. As an independent corporate trustee, Cumberland Trust is here to be a resource to help families execute the plan that has been put in place for beneficiaries with special needs and to provide families with peace of mind for the future.”
Michelle Diamond, Chief Development Officer, Cumberland Trust
Experienced administration for both types of special need trusts.
First-Party Special Needs Trusts
First-Party Special Needs Trusts are funded with assets belonging to the beneficiary with special needs–often as a result of litigation– to protect that individual’s eligibility for public need-based funding.
Third-Party Special Needs Trusts
Third-Party Special Needs Trusts are set up by a donor, typically through an estate plan. The trust is established for a person with special needs to supplement, not supplant, any benefits the individual may receive from government programs. Often, these trusts go into effect when the donor passes away.
Help your clients support family members with special needs.
We’re here to help plan for the future.
Contact us today to explore Special Needs Trust administration services.