A “Special Needs Trust” is a legal device for sheltering resources for supplemental needs for a person with a disability.  Special Needs Trusts provide resources to improve the quality of life, but they do not replace government benefits that cover basic needs.  Funds from the trust can be used for travel, recreation, cable television, computer equipment and more. 

Specific requirements of a “Special Needs Trust” include:

• It must be written;
• Distributions are at the discretion of the trustee;
• The trust beneficiary is not entitled to receive any income or principal from the Trust;
• The trustee is prohibited from making any distributions that would jeopardize the beneficiary’s eligibility for benefits;
• The special needs trust must be irrevocable.

There are two main types of “Special Needs Trusts”:

• Third party settled Special Needs Trusts:  A parent or other third party can establish these trusts.  Only funds from a third party can be added to this type of trust. It must be irrevocable.  At the death of the beneficiary, you can direct any remainder assets to other loved ones or to The Arc of New Mexico or any other organization of your choice.

The Arc of New Mexico has established a third party pooled Master Trust II.  For additional information, please call Jo Ann Baxter at The Arc of New Mexico – (505) 883-4630 or . 

• Self-Settled “Special Needs Trusts”:  There are different types of self-settled trusts:

A “(d)(4)(A)” or “payback” trust (also called “reversionary trusts” by New Mexico Medicaid office).  These trusts must be irrevocable and can be set up only by a parent, grandparent, court or guardian who is usually the trustee.  The disabled beneficiary must be younger than 65 and must be funded with settlement or judgment funds of the person with the disability.  And Medicaid must be reimbursed with any remainder funds at the death of the beneficiary.  In your Will you can direct any inheritance for your loved one with disability to a “special needs trust” rather than leaving it directly to them which might jeopardize their benefits. 


A “(d)(4)(C)” trust or “pooled” trust can be set-up by a non-profit 501(c)(3) organization like The Arc of New Mexico.  In April of 1998, The Arc of New Mexico Master Pooled Trust I was established.  The Arc of New Mexico is the trustee and manages the funds as a pooled trust.  Individual sub-accounts are established.  A trust can be created by the beneficiary, as well as by a parent, grandparent, guardian, rep payee, or court.  Trust funds come from excess earnings, settlement or judgment funds, direct inheritances or gifts to the individual with a disability.  The trust is irrevocable and at the death of the beneficiary, The Arc of New Mexico retains any funds left in the individual trust for the benefit other persons with developmental disabilities.

Consideration for the selection of a “Trustee” of a Special Needs Trust:

• Selection of a “trustee” is very important;
• The trustee must understand how to make distributions from the special needs trust and know what distributions would jeopardize any benefits being received;
• Trustee must understand SSI regulations and respond quickly to any notices received and do periodic reporting to SSI;
• The trustee must understand investing and taxes;
• For The Master Trust I & II established by The Arc of New Mexico, The Arc is the trustee

“Special Needs Trusts” are essential for planning for persons with developmental disabilities.  Maintaining eligibility for persons with disabilities receiving government benefits is often difficult for family members who want to provide support and care for their loved one with a disability.  “Special Needs Trusts” provide the solution for sheltering resources.  A well-managed support circle and the use of “Special Needs Trusts” can maximize government benefits and provide peace of mind.

For additional information, please contact
Jo Ann Baxter at The Arc of New Mexico: (505) 883-4630 or .