Using Special Needs Trusts to Protect Vulnerable Beneficiaries
People need to know how to use a special needs trust to protect their beneficiary’s eligibility for programs like Supplemental Security Income (SSI) or Medicaid, while still providing for that person’s future. Under Kansas law, these trusts serve as powerful tools to offer support without putting critical assistance at risk.
At Oleen Law Firm, we’ve seen how deeply families want to care for loved ones with disabilities or other vulnerabilities. When someone depends on public assistance or government benefits, managing inheritance and other financial resources can become legally complicated.
What Is a Special Needs Trust?
A special needs trust is a legal arrangement that holds assets for the benefit of a person with a disability without affecting their eligibility for public benefits.
This type of trust limits how and when funds can be used, which is key to remaining compliant with the strict financial requirements tied to SSI and Medicaid. Rather than giving money directly to the beneficiary, the trust owns and manages those assets.
That separation makes all the difference. Public assistance programs often look at the income and resources available to the beneficiary. If someone inherits property, receives a legal settlement, or is gifted a large sum of money outright, they may be disqualified from benefits. A properly constructed special needs trust avoids that issue.
Why Special Needs Trusts Matter
For families with vulnerable loved ones, a special needs trust is more than just a legal option—it’s a form of protection. A trust allows a person to enjoy additional comforts and life enhancements without giving up vital support.
It can pay for things like dental care, therapies not covered by insurance, travel expenses, a wheelchair-accessible vehicle, or even recreational activities. These trusts also protect vulnerable individuals from financial exploitation.
In Kansas, it is not unusual for adults with disabilities to be targeted by individuals or businesses hoping to take advantage of a windfall. A trust managed by a trusted third-party trustee adds an important layer of oversight.
Types of Special Needs Trusts
There are three main types of special needs trusts recognized in Kansas law. The type that makes the most sense depends on where the funds come from and the situation of the beneficiary.
First-party special needs trust: Funded with the beneficiary’s own money, typically from a personal injury settlement, inheritance, or other direct receipt of funds. These are also called “self-settled” trusts and must be created before the beneficiary turns 65. Importantly, Medicaid must be reimbursed from any remaining assets when the beneficiary dies.
Third-party special needs trust: Funded by someone other than the beneficiary, such as parents, grandparents, or a legal guardian. These trusts are typically part of an estate plan and are not subject to Medicaid payback. Because the money never belonged to the beneficiary, remaining funds can be distributed according to the grantor’s wishes after the beneficiary’s death.
Pooled special needs trust: Managed by nonprofit organizations, pooled trusts combine resources from many beneficiaries into a single investment fund. Each beneficiary still has a separate sub-account. This option may be appropriate for those without a family member or professional trustee to manage the funds independently.
Legal Requirements Under Kansas Law
In Kansas, a special needs trust must meet certain legal standards to be valid. First, it must be irrevocable. That means once the trust is created, the person who establishes it cannot change their mind and cancel it. Second, it must clearly state that it is intended to supplement—not replace—government benefits.
The trust document should outline how the funds may be used, what limitations apply, and who will serve as trustee. Kansas courts have upheld the principle that the trust should not provide for food or shelter, as those are considered “in-kind support and maintenance” under SSI rules and could reduce benefits.
Instead, the trust should be written to allow discretionary disbursements for services or goods that improve quality of life without replacing basic support.
Choosing the Right Trustee
The trustee plays a central role in managing a special needs trust. This individual or entity is responsible for making decisions about how the funds are spent, filing taxes, keeping records, and complying with both federal and state regulations.
In Kansas, a trustee can be a family member, professional fiduciary, or a financial institution. When families come to us at Oleen Law Firm, we guide them in evaluating the best options for their situation.
Some parents choose to name a trusted sibling or relative, while others feel more comfortable appointing a corporate trustee who has experience managing disability-related funds. What matters most is that the trustee understands the legal limitations and remains committed to acting in the beneficiary’s best interest.
How a Special Needs Trust Protects Eligibility
One of the main concerns for any family involved in a special needs trust discussion is preserving access to Medicaid and SSI. Both programs have strict asset limits.
For example, SSI recipients typically cannot own more than $2,000 in countable resources. That’s a low threshold, and many types of property count toward it. With a special needs trust in place, assets held in the trust are not considered the beneficiary’s resources. This allows a family to provide support without jeopardizing benefits.
When managed properly, the trust can pay directly for services, goods, or experiences that elevate the beneficiary’s daily life while complying with Kansas and federal guidelines.
What a Special Needs Trust Can Pay For
Special needs trusts are highly specific in what they can and cannot cover. Generally, funds from a special needs trust can be used to pay for:
Medical expenses not covered by insurance or Medicaid
Dental work, hearing aids, or vision care
Hobbies, classes, or educational programs
Computers, cell phones, and electronics
Home modifications to improve accessibility
Vacations and recreational activities
Transportation services or adapted vehicles
Legal or advocacy services
These are considered supplemental items that go beyond basic necessities. A trust should never pay directly for food, rent, or utilities unless it's structured in a way that accounts for the possible reduction in SSI benefits.
Estate Planning with a Special Needs Trust
At Oleen Law Firm, we often incorporate special needs trusts into a broader estate plan. Parents and relatives want peace of mind knowing that their loved one will be supported long after they’re gone.
We help clients draft wills or revocable living trusts that pour assets into the special needs trust upon death. This keeps the inheritance out of the beneficiary’s name and maintains eligibility for public assistance.
A well-drafted estate plan also includes naming a backup trustee, offering instructions for care, and outlining funeral or end-of-life wishes. Kansas families deserve to plan for the future with clarity and care. By integrating a special needs trust into your estate planning, you can do just that.
How Kansas Courts View Special Needs Trusts
Kansas courts generally recognize and support the use of special needs trusts as long as they are properly structured. When conflicts arise—such as disputes over how funds are spent, or when trustees misuse assets—courts can intervene to protect the beneficiary.
That’s why legal guidance is so critical. Mistakes in trust wording, mismanagement of funds, or improper distributions can cause loss of public assistance and legal consequences.
We’ve represented families in Junction City and throughout Kansas who want to correct an existing trust or address trustee misconduct. Proper setup from the beginning is always preferable, but it’s never too late to make corrections with legal help.
When to Set Up a Special Needs Trust
Families often ask us: "When is the right time to establish a special needs trust?" Our answer is almost always the same: "Now."
Whether your child has been recently diagnosed with a disability, you’ve just settled a personal injury claim, or you’re simply thinking ahead, it’s never too early to start. Life is unpredictable. Waiting too long can lead to financial hardship, loss of benefits, or court involvement.
Establishing a trust early gives you time to evaluate trustees, clarify instructions, and coordinate with your overall estate plan. In Kansas, setting up a special needs trust requires legal precision, so it’s important to work with attorneys who understand the intricacies of state and federal law.
Compassionate Legal Counsel
Our attorneys, Bentson and Kent Oleen, know what’s at stake when families come to us about protecting a loved one with a disability. We are proud to serve Manhattan, Kansas, and the surrounding town of Junction City. Call Oleen Law Firm today.