Choosing the Right Type of Special Needs Trust in Utah

Planning for a loved one with special needs is one of the most meaningful things a family can do. It is also one of the most legally complex. For families in Bountiful and throughout Utah, a special needs trust can preserve eligibility for critical government benefits while ensuring your loved one has the financial support they need to live a full, dignified life.

But not all special needs trusts work the same way. The type that fits your situation depends on where the money is coming from, who is setting up the trust, and what your family’s long-term goals are. Choosing the wrong structure can jeopardize benefit eligibility or create tax complications down the road.

Here is a plain-English breakdown of the three main types of special needs trusts available under Utah and federal law, and how to think about which one is right for your family.

What Is a Special Needs Trust?

A special needs trust holds assets for a person with disabilities without disqualifying them from Medicaid, SSI, or other means-tested benefit programs.

Under federal law, individuals receiving Supplemental Security Income (SSI) or Medicaid must meet strict asset limits. As of this writing, the SSI resource limit for an individual is $2,000. A special needs trust is a legally recognized tool that holds assets outside of that limit, so long as the trust is properly structured and the beneficiary does not have direct control over the funds.

Utah follows federal guidelines under 42 U.S.C. § 1396p(d)(4) for the types of trusts that qualify for this treatment. Getting the structure right from the start matters enormously.

First-Party Special Needs Trusts (Self-Settled Trusts)

A first-party trust holds assets that belong to the person with disabilities, such as a personal injury settlement or an inheritance received directly.

This type of trust is sometimes called a self-settled or (d)(4)(A) trust, referencing the federal statute that authorizes it. It must be established in accordance with federal law, and the beneficiary must be under age 65 when the trust is established and funded.

First Party Trusts and Medicaid Payback

The critical distinction with a first-party trust is the Medicaid payback requirement. When the beneficiary passes away, the state of Utah must be reimbursed for any Medicaid benefits paid on their behalf before remaining assets can pass to other heirs. This is not a penalty; it is a federal requirement tied to the use of the beneficiary’s own funds.

First-party trusts are often used when a person with disabilities receives a legal settlement, an inheritance distributed directly to them, or another lump sum in their own name and would otherwise lose government benefits. Without this structure, that money could disqualify them from Medicaid almost immediately.

Third-Party Special Needs Trusts (or Supplemental Needs Trust)

A third-party trust is funded with assets belonging to someone other than the beneficiary, typically a parent, grandparent, or other family member.

This is the most common type of special needs trust that families plan with in advance. Unlike a first-party trust, a third-party trust has no Medicaid payback requirement, because the assets placed within it are from a person other than the person with special needs. When the beneficiary passes away, any remaining assets can go to other family members or chosen beneficiaries.

A third-party trust can be set up as a standalone document or as a testamentary trust within a will. Families often create these trusts as part of a broader estate plan, funding them gradually over time or designating them as beneficiaries of life insurance policies and retirement accounts.

For parents in Bountiful raising a child with special needs, a third-party trust is frequently the centerpiece of long-term planning. It allows the family to leave a legacy of support without accidentally disqualifying their loved one from benefits that provide housing assistance, medical care, and daily support services.

Pooled Special Needs Trusts

A pooled trust is managed by a nonprofit organization that combines assets from multiple beneficiaries for investment purposes while maintaining separate accounts for each individual.

Pooled trusts are authorized under 42 U.S.C. § 1396p(d)(4)(C) and are administered by nonprofit associations. In Utah, they offer a practical solution for families who need a special needs trust but lack the resources to fund a standalone trust or find a private trustee.

Each beneficiary has their own sub-account within the larger pool. The nonprofit handles investment management, distributions, and compliance, which reduces the administrative burden on families considerably.

Pooled trusts can hold both first-party and third-party funds, though the Medicaid payback rules apply to first-party sub-accounts just as they would in a standalone first-party trust. For some beneficiaries over age 65, a pooled trust may be an available option for preserving Medicaid eligibility while holding their own assets, although transfers to pooled trusts after age 65 can trigger Medicaid transfer-penalty rules.

How to Choose the Right Trust for Your Family

The right trust depends on three key questions:

• Whose money is going into the trust?
• How much do you expect to fund it with, now and in the future?
• What are your goals for remaining assets after your loved one passes?

If the funds belong to your loved one directly, a first-party or pooled trust is likely required. If you are funding the trust as part of your own estate plan, a third-party trust almost always makes more sense. For smaller estates or situations without a ready trustee, a pooled trust can provide structure and oversight that a family-managed trust cannot.

Utah’s probate courts and the Social Security Administration’s Program Operations Manual System (POMS) provide the legal framework for how each trust type must be structured and administered to preserve benefit eligibility.

Get In Touch With Our Special Needs Trust Lawyer 

At Able & Strong Law, we understand that this planning is deeply personal. Our firm was founded with a genuine understanding of what families with special needs members face, and we approach every case with that perspective in mind. To learn more about your options and the type of special needs trusts in Utah, get in touch with our firm. 

If you are ready to start the conversation about a special needs trust for your loved one,  contact us or call us at (801) 683-9143. We serve families throughout Bountiful and the greater Salt Lake area.

Last updated: July 2026