Understanding Special Needs Trusts: How to Plan for Your Loved One’s Future

Planning for the future is one of the most important — and emotional — steps families take when caring for a loved one with a disability. You want to ensure they’re supported, protected, and able to thrive long after today.
A Special Needs Trust (SNT) is one of the most powerful tools available to families in Colorado. It allows you to safeguard your loved one’s financial future without jeopardizing eligibility for essential benefits like Medicaid or SSI.

Here’s a step-by-step guide to help you understand and begin the process.

Step 1: What Is a Special Needs Trust?

A Special Needs Trust is a legal arrangement that holds money or assets for the benefit of a person with a disability. Funds can be used for care, education, and quality-of-life expenses — without counting as income that could disqualify them from programs like:

• Medicaid (Health First Colorado)
• Supplemental Security Income (SSI)

The trust can help cover things like:

• Medical devices and therapies
• Education and training
• Transportation
• Personal care items
• Recreation and community activities

This structure offers financial flexibility while preserving vital supports.

Step 2: Know the Types of Special Needs Trusts

Colorado recognizes three primary types of Special Needs Trusts:

1. First-Party Trust (Self-Settled Trust)

• Funded with the individual’s own assets (e.g., settlement, inheritance, back payments)
• Must be created before age 65
• Requires a Medicaid payback clause

2. Third-Party Trust

• Funded by parents, relatives, or friends
• No Medicaid payback required
• Can be created during your lifetime or through a will
• Commonly used for long-term planning

3. Pooled Trust

• Managed by a nonprofit that combines resources for investment
• Each beneficiary maintains a separate account
• Ideal for smaller assets or when families prefer a professional trustee

A widely used Colorado option is the Colorado Fund for People with Disabilities (CFPD)

Step 3: Don’t Forget About ABLE Accounts (Important Update)

In addition to Special Needs Trusts, families can also consider ABLE Accounts — a powerful and flexible financial tool for individuals with disabilities.

What is an ABLE Account?

An ABLE account allows individuals with qualifying disabilities to save money without losing Medicaid or SSI eligibility (up to federal limits). Funds can be used for disability-related expenses, including:

• Education
• Housing
• Employment support
• Technology
• Health and wellness

Key benefits:

• Easy to open and manage
• Low-cost and tax-advantaged
• Complements — not replaces — a Special Needs Trust

Colorado’s ABLE program:
🔗 https://www.mycoloradoable.com

Parents often use both an ABLE Account and an SNT as part of a comprehensive financial plan.

Step 4: Choose the Right Trustee

The trustee manages the trust funds and ensures they’re used correctly. Options include:

• A responsible family member
• A professional trustee (bank, attorney, fiduciary)
• A nonprofit organization (for pooled trusts)

Trustees handle all disbursements, recordkeeping, and compliance — so it’s essential to choose someone dependable and financially knowledgeable.

Step 5: Work with an Experienced Attorney

Special Needs Trusts involve state and federal regulations. A skilled attorney ensures everything is set up properly.

A Colorado-based disability or estate planning attorney can:

• Determine the appropriate trust type
• Draft the legal documents

Provide guidance on funding and administration

Step 6: Fund the Trust

Trusts may be funded using:

• Gifts
• Inheritances
• Life insurance policies naming the trust as beneficiary
• Savings or investments

Make sure assets are directed into the trust — not directly to the individual — to protect benefits.

Step 7: Review and Update Regularly

Review the trust periodically or after major life events (marriage, divorce, changes in benefits, etc.). Updates ensure the trust remains aligned with your loved one’s needs.

Step 8: Communicate the Plan

Inform family members, caregivers, and support providers about the trust and how it works. Clear communication ensures coordinated support and minimizes confusion in the future.

Final Thought

Creating a Special Needs Trust — or opening an ABLE Account — is more than a financial act. It’s a decision rooted in love, protection, and long-term empowerment. By preparing today, you’re giving your loved one the security, dignity, and independence they deserve.

If you’d like help connecting with resources or trusted professionals in Colorado, RiseUP is here to support you.

Rising Together. Thriving Forever.

About RiseUP

RiseUP is at the forefront of advancing inclusion for neurodivergent individuals in Colorado. With a dedicated K–12 school, adult day and residential programs, and supported employment services, RiseUP provides comprehensive support from childhood through adulthood. RiseUP’s mission is to promote dignity and self-worth by building transformational communities where people of all abilities thrive side by side.  Together, we RiseUP for inclusion.