Direct Answer: A special needs trust in Ohio is a legal arrangement that holds assets for a person with a disability without disqualifying them from Medicaid or SSI. The trust pays for goods and services that government benefits do not cover, while preserving the beneficiary's eligibility for those programs. Ohio special needs trusts are governed by Ohio Revised Code 5815.28 and federal law under 42 U.S.C. 1396p(d)(4).
What Is a Special Needs Trust
A special needs trust (also called a supplemental needs trust) is a type of irrevocable trust designed to benefit a person with a physical or mental disability. The trust holds assets and uses them to pay for the beneficiary's supplemental needs, meaning goods and services that government programs like Medicaid and Supplemental Security Income (SSI) do not provide.
The key feature of a special needs trust is that the assets inside it are not counted as the beneficiary's own resources when determining eligibility for government benefits. Without a special needs trust, a person with a disability who receives an inheritance or personal injury settlement may lose their Medicaid and SSI eligibility because their assets exceed the program limits (typically $2,000 for SSI).
In Ohio, special needs trusts are authorized under Ohio Revised Code 5815.28. Federal law governing these trusts is found at 42 U.S.C. 1396p(d)(4). The trust must be drafted carefully to comply with both Ohio law and federal Medicaid rules. A trust that does not meet all legal requirements may not protect the beneficiary's government benefit eligibility.
There are two main types of special needs trusts in Ohio: third-party trusts, funded by family members or others, and first-party trusts (also called self-settled trusts), funded with the beneficiary's own assets such as a personal injury settlement or inheritance. The rules differ between the two types, particularly regarding what happens to remaining trust assets when the beneficiary dies.
Third-Party Special Needs Trust
Funded by parents, grandparents, or other family members. No Medicaid payback requirement at the beneficiary's death. Remaining assets pass to other family members or named beneficiaries. Most commonly used in estate planning for a family member with a disability.
First-Party Special Needs Trust
Funded with the beneficiary's own assets, such as a personal injury settlement, inheritance, or divorce settlement. Must include a Medicaid payback provision: when the beneficiary dies, Ohio Medicaid is reimbursed for benefits paid during the beneficiary's lifetime before remaining assets pass to heirs.
How to Set Up a Special Needs Trust
Setting up a special needs trust in Ohio requires several steps, each of which must be done correctly to ensure the trust protects the beneficiary's government benefit eligibility.
Consult an Ohio Estate Planning Attorney
Special needs trusts require precise legal drafting. An attorney who is familiar with Ohio Medicaid rules and federal SSI regulations will draft the trust document to comply with all requirements. A generic trust template is not sufficient.
Determine the Type of Trust Needed
The attorney will help you determine whether a third-party or first-party trust is appropriate based on the source of the assets and the beneficiary's situation. If the trust will be funded with the beneficiary's own assets (such as a personal injury settlement), a first-party trust with a Medicaid payback provision is required.
Name a Trustee
The trustee manages the trust assets and makes distribution decisions. The trustee must understand the rules governing special needs trusts to avoid making distributions that would disqualify the beneficiary from government benefits. A family member, professional trustee, or nonprofit organization can serve as trustee.
Sign and Fund the Trust
The trust document must be signed before a notary. Once signed, assets are transferred into the trust. For a third-party trust, family members can fund it with cash, investments, real estate, or life insurance proceeds. For a first-party trust, the beneficiary's own assets are transferred in, often as part of a personal injury settlement or probate proceeding.
Notify Medicaid and SSI (If Required)
If the trust is funded with the beneficiary's own assets, the Social Security Administration and Ohio Medicaid may need to be notified. An attorney can advise on notification requirements and help ensure the trust is properly documented with the relevant agencies.
What Can a Special Needs Trust Not Pay For
The most common mistake trustees make is paying for items that reduce or eliminate the beneficiary's government benefits. Understanding what a special needs trust cannot pay for is as important as knowing what it can pay for.
A special needs trust cannot pay for food or shelter without reducing the beneficiary's SSI payment. Under SSI rules, if a trust pays for food, rent, mortgage payments, or utilities, the SSI payment is reduced by up to one-third of the federal benefit rate. This is called in-kind support and maintenance (ISM).
The trust also cannot make direct cash distributions to the beneficiary. Cash given directly to the beneficiary counts as income for SSI purposes and reduces the monthly SSI payment dollar-for-dollar. The trustee must pay vendors directly for goods and services rather than giving money to the beneficiary.
What a Special Needs Trust CAN Pay For
- Medical and dental care not covered by Medicaid
- Education, tutoring, and vocational training
- Transportation and vehicle expenses
- Personal care attendants and support services
- Recreation, entertainment, and travel
- Technology and communication devices
- Clothing and personal items
- Household furnishings and appliances
- Life insurance premiums
- Legal fees and financial planning
What a Special Needs Trust CANNOT Pay For
- Food (reduces SSI payment)
- Rent or mortgage payments (reduces SSI payment)
- Utilities (reduces SSI payment)
- Direct cash to the beneficiary
- Items that replace Medicaid-covered services
- Anything that makes the beneficiary ineligible for benefits
How Much Can I Put Into a Special Needs Trust
For third-party special needs trusts (funded by family members), there is no federal limit on how much can be contributed. Family members can contribute as much as they choose, and the assets inside the trust are not counted toward the beneficiary's SSI resource limit.
Contributions from family members may be subject to federal gift tax rules if they exceed the annual gift tax exclusion. In 2024, the annual exclusion is $18,000 per donor per year. Contributions above this amount may require the donor to file a gift tax return, though actual gift tax is rarely owed because of the lifetime exemption. The One Big Beautiful Bill Act, signed in 2025, raised the federal estate and gift tax exemption to $15 million per person, which significantly reduces gift tax concerns for most families.
For first-party special needs trusts (funded with the beneficiary's own assets), there is also no federal cap on the amount that can be placed in the trust. However, the trust must include a Medicaid payback provision, and the assets in the trust are subject to Medicaid reimbursement claims at the beneficiary's death.
| Trust Type | Contribution Limit | Medicaid Payback Required | Who Can Fund |
|---|---|---|---|
| Third-Party SNT | No federal limit | No | Family members, others |
| First-Party SNT | No federal limit | Yes | Beneficiary's own assets |
| Pooled Trust | No federal limit | Yes (partial) | Beneficiary's own assets |
What Can a Special Needs Trust Pay For
A special needs trust is designed to improve the beneficiary's quality of life by paying for goods and services that government benefits do not cover. The trustee has broad discretion to approve expenditures that supplement, rather than replace, the beneficiary's government benefits.
Medical and dental expenses not covered by Medicaid are among the most common and valuable uses of special needs trust funds. This includes out-of-pocket costs for specialists, therapies, medications, and medical equipment that Medicaid does not cover or covers only partially.
Education and vocational training are also permitted. The trust can pay for college tuition, specialized educational programs, job training, and tutoring. Transportation expenses, including the purchase of a vehicle adapted for the beneficiary's needs, are permitted. Personal care attendants and support services not covered by Medicaid can be paid from the trust.
Recreation and entertainment expenses are permitted because they improve the beneficiary's quality of life without replacing government benefits. This includes gym memberships, travel, concerts, sporting events, and hobby supplies. Technology and communication devices, including computers, tablets, and communication aids, are also permitted.
The trustee should document all distributions and the purpose of each expenditure. Good record-keeping protects the trustee and demonstrates that distributions were made for the beneficiary's supplemental needs, not as a replacement for government benefits.
Ready to Set Up a Special Needs Trust in Ohio?
Wolterman Law Office helps Ohio families create special needs trusts that protect their loved one's government benefits while providing for their future. Schedule a consultation to discuss your situation.
Schedule a Consultation Call (513) 224-5191Frequently Asked Questions: Special Needs Trusts in Ohio
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 disqualifying them from Medicaid or SSI. The trust pays for goods and services that government benefits do not cover, while preserving the beneficiary's eligibility for those programs. In Ohio, special needs trusts are authorized under Ohio Revised Code 5815.28.
How do you set up a special needs trust in Ohio?
Setting up a special needs trust in Ohio requires drafting a trust document that complies with Ohio law and federal Medicaid rules, naming a trustee, and funding the trust with assets. The trust must be irrevocable and include specific language to preserve the beneficiary's government benefit eligibility. An Ohio estate planning attorney drafts the trust document and ensures it meets all legal requirements.
What can a special needs trust not pay for?
A special needs trust cannot pay for food or shelter (rent, mortgage, utilities) without reducing the beneficiary's SSI payment. It also cannot make direct cash distributions to the beneficiary, as cash counts as income for SSI purposes. The trustee must pay vendors directly rather than giving money to the beneficiary.
How much can I put into a special needs trust?
For third-party special needs trusts funded by family members, there is no federal limit on contributions. For first-party trusts funded with the beneficiary's own assets, there is also no cap, but the trust must include a Medicaid payback provision. Contributions from family members may be subject to annual gift tax exclusion rules ($18,000 per donor in 2024).
What can a special needs trust pay for?
A special needs trust can pay for medical and dental care not covered by Medicaid, education and tutoring, transportation, personal care attendants, recreation and entertainment, technology and communication devices, clothing, and household furnishings. The trustee pays vendors directly for these goods and services to avoid reducing the beneficiary's government benefits.
What are Medicaid trusts in Ohio?
Medicaid trusts in Ohio are trusts designed to protect assets while preserving Medicaid eligibility. A special needs trust is one type of Medicaid trust. Another type is an irrevocable Medicaid asset protection trust (MAPT), which is used for long-term care planning. The rules governing each type differ significantly, and the appropriate trust depends on the individual's situation and goals.
This page is for general informational purposes only and does not constitute legal advice. Ohio special needs trust laws and individual circumstances vary. Consult a licensed Ohio attorney for advice specific to your situation. Content reviewed by Steve Wolterman, Wolterman Law Office, July 2026.