A supplemental needs trust really refers to two types of trusts and the names are often used interchangeably. The primary purpose of the trust is to make assets available for a disabled beneficiary without making the assets count towards that beneficiary’s eligibility for social welfare programs such as Medicaid. The first type of supplemental needs trust is a third party supplemental needs trust and the second type is a special needs trust. A third party supplemental needs trust is both created by a third party (not by the disabled individual) and funded with assets of that third party. The third party who creates and funds the trust is usually a parent or grandparent for the benefit of a disabled child or grandchild.

The second type of supplemental needs trust is a special needs trust, also referred to as a "self-settled" trust because it is created by the disabled person and funded with the disabled beneficiary’s own funds. With this trust, when the disabled person dies, the trust must reimburse the state for any medical paid by the state to the disabled person under the Medicaid program.