Special-needs planning
Special needs trusts that protect benefits eligibility.
If you have a child, sibling, or other beneficiary who relies on need-based government benefits — Medicaid, SSI, Section 8 housing, others — leaving them money directly disqualifies them from those benefits. The standard tool is a Special Needs Trust (SNT), which holds funds for their benefit without counting as their personal assets. Done correctly, it preserves benefits while supplementing them with quality-of-life funds.
There are two main types: a third-party SNT (funded by you, for someone else's benefit — what most parents need) and a first-party SNT (funded with the beneficiary's own money, used for personal injury settlements or similar). Both follow strict rules — the beneficiary cannot have direct access, the trustee has near-total discretion, and certain expenditures are prohibited.
We're estate planners, not government-benefits attorneys, but special-needs planning is part of what we draft. For complex Medicaid eligibility issues or active disputes with state benefits agencies, we coordinate with elder law specialists. The SNT itself is well within our practice.
What this means for you
- Direct inheritance disqualifies benefits. Even a small amount ($2,000 for SSI) ends eligibility. Re-establishing benefits after the money is spent is months of paperwork.
- An SNT can pay for education, transportation, hobbies, technology, vacations, personal care attendants beyond what Medicaid covers, household items — anything that supplements but doesn't replace public benefits.
- An SNT cannot pay directly for food, shelter, or basic medical care that public benefits already provide (those would reduce SSI dollar-for-dollar).
- The trustee's discretion is critical. A poorly-chosen trustee can either wreck benefits eligibility or fail to actually use the funds for the beneficiary's quality of life.
- Coordination with siblings and other family. Often grandparents or aunts/uncles want to leave money to a special-needs beneficiary. We coordinate with their attorneys so their gifts also flow into the SNT, not directly.
Recommended documents
Most situations route to one or two probate paths. Here are the most likely fits — read the detailed page on whichever feels closest, or use the consult to confirm.
What we watch for
Easy on people, tough on problems. These are the things that catch families off guard — we've seen them all and we plan around them.
- Leaving an outright bequest to a special-needs beneficiary. The single most common pitfall. Even $5,000 in a checking account can disqualify SSI for months. Always through the SNT.
- Naming a trustee who doesn't understand SNT rules. A trustee who pays for groceries can reduce SSI. Pick a trustee who's read the rules — or coordinate with a professional co-trustee.
- Not telling family members. Grandparents, godparents, family friends often want to leave money — and disqualify benefits doing it. We help with communication.
- Mixing first-party and third-party SNTs. They follow different rules. Personal injury settlements need first-party SNTs (with Medicaid payback at death). Gifts and bequests use third-party SNTs (no payback).
- Failing to update for changes in benefits law. Federal and state benefits programs change. Reviews every 2–3 years.
Questions families ask us
Planning for a beneficiary with special needs is some of the most meaningful work we do. The legal answer is well-established but the conversation requires care — every family has its own balance of love, worry, and hope. We'll handle the documents with rigor and the conversations with warmth. Your special-needs family member deserves a plan as thoughtful as everyone else's.