A special needs trust in Arizona lets you set aside money for a loved one with a disability. It does this without putting their public benefits at risk. The trust holds funds in a separate account. Those funds do not count toward the strict asset limits for programs like SSI and AHCCCS.
Why a Special Needs Trust Is Necessary
Programs like Social Security's SSI and AHCCCS have very low asset caps. For SSI, the limit is usually $2,000 in countable assets. Even a small gift or inheritance can push someone over that cap. They could lose the benefits they depend on for housing, food, and health care.
A special needs trust fixes this. Assets inside the trust do not count toward the limit. The trust must be properly drafted and managed. The goal is to boost the person's quality of life without taking away the public benefits they already get.
What a Trustee Can Pay For
The trustee of the trust can use funds to pay for things that add to what benefits already cover. Allowed costs usually include:
- Personal care items and grooming
- Rides and travel, including a car
- Gadgets, fun, and trips
- Out-of-pocket medical and dental costs
- Schooling and job training
- Home items and changes for access needs
The trustee should not give cash straight to the person on benefits. Payments for food and shelter may reduce SSI under the in-kind support rule. This is an area where careful planning makes a big difference.
First-Party vs. Third-Party Trusts
Third-party special needs trust: A parent, grandparent, or other family member sets up this trust. They fund it with their own money. This is often done through a will, a living trust, or a life insurance policy. When the person with the disability passes away, leftover funds go to other family members you choose. There is no Medicaid payback rule.
First-party special needs trust: This is funded with the disabled person's own money. It could come from a legal settlement or an inheritance they got outright. Federal law under 42 U.S.C. 1396p(d)(4)(A) allows this type. But when the person dies, any leftover funds must first repay AHCCCS for benefits they received during their lifetime.
The type you need depends on where the money comes from. An attorney can help you choose the right one.
Choosing the Right Trustee
The trustee has a big job. They must know the payout rules, keep detailed records, and act in the person's best interest. Many families choose a trusted family member, a licensed fiduciary (a person with a legal duty to act in your best interest), or a mix of both. The attorneys we work with can help you figure out what makes sense for your family.
Getting Started
Setting up a special needs trust starts with knowing your loved one's current benefits and their future needs. You also need to know how to guard assets the right way. The sooner you plan, the better.
For more on how trusts fit into a broader estate plan, read our guide on trusts vs. wills. The right trust protects what matters most.