Special Needs Estate Planning: Preserving Your Disabled Child’s Public Benefits and Maintaining Their Quality of Life

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• It’s important that an individual with special needs maintains
some level of covered benefits, such as social security or
Medicaid, amongst other resources. However, without proper
planning it is easy for a family or individual to misstep and
lose their benefits. 

• A special-needs individual can generally have up to $2,000 in
their name- anything above that and they may lose their
eligibility for government benefits. While this is not a lot of
money, it’s very possible to maintain and stay under that limit
with proper planning.

• The two primary planning options to assist a disabled
individual in staying under the $2,000 resource limit are: 1) An
ABLE account; and 2) a Special Needs Trust (either first-party or
a third-party).

• The two major differences between a first-party special needs
trust and a third-party special needs trust is that a first-party
trust is always irrevocable, whereas a third-party trust can be
either irrevocable or revocable. Additionally, a first-party
special needs trust has a “Medicaid payback”, meaning if the
individual with the disability passes away, any funds left in the
trust would go to Medicaid, whereas this is not the case with a
third-party special needs trust.

• Common trust strategies: 
-Create a testamentary trust: a trust that does not become active
until the grantors have passed away.
-Create and fund at third-party trust now, however this will be
subject to accounting and taxes.
-Create a third-party trust as a “dry” trust, meaning it’s active
but there’s nothing in it. This allows family members to include
this third-party special needs trust in their own estate
plans.
-Create an ABLE account: this is an account that can accumulate
$15,000/annually, or $100,000 in total, of funds that will not
count against the resource limit or eligibility of the individual
with a disability. This account also allows for the special-needs
individual to have access to a set amount of funds via a loadable
debit card. Unlike first- and third-party special needs trusts,
an ABLE account cannot account for assets; it can only account
for money. Therefore, it’s a great option to be considered
alongside a trust, rather than in place of a trust.

• Create a list of all personal preferences, details, medical
notes and contact information, and activity schedules of the
special-needs individual for any person who may assume a
guardianship role in their life to help ensure sustained quality
of life.