Families and caregivers supporting loved ones with disabilities often face a common and deeply personal challenge — how to provide legal planning for loved ones with disabilities without disrupting their access to essential government benefits. Often there is also a concern about how to protect assets from medical bills and other long-term care costs – such as their home, life savings, or even an expected inheritance.
The disability planning process can feel confusing and even isolating. However, tools like Special Needs Trusts (also known as Supplemental Needs Trusts or SNT) and ABLE accounts are designed to assist families protect their assets, preserve benefits, create stability for loved ones with disabilities.
SNT can pay for expenses that government programs may not cover, such as therapies, education, transportation, recreation, and technology.
Special Needs Trusts and ABLE accounts can support a wide spectrum of people living with various disabilities:
- Cognitive Disabilities: Mental conditions that impact reasoning, memory, decision-making (i.e., traumatic brain injury, intellectual disability, dementia)
- Functional Impairments: Physical and/or neurological conditions affecting movement, strength, daily functioning (i.e., hearing or vision loss, Multiple Sclerosis, Parkinson’s disease)
- Neurodivergent Conditions: Thinking and learning disabilities (i.e., autism spectrum disorder, attention deficit hyperactivity disorder)
- Neurodiverse/Mental Health Conditions: Thinking and mood or behavior disabilities (i.e., dyslexia, bipolar disorder, anorexia)
People with disabilities may benefit greatly from the financial protections and inclusive estate planning offered through Special Needs Trusts and ABLE programs, which can help them preserve their benefits and maintain their quality of life.
“A lot of times, when you have a disability, one of the things that you deal with is the other people’s projections of what your experience is and their fear about it …. It’s my reality and my life, but it’s not horrible.”
~attributed to Michael J. Fox
Special Needs Trusts (SNTs)
Directly gifting money to a person with disabilities can unintentionally jeopardize their benefits. A Special Needs Trust is a legal structure that holds assets for a person with a disability in many cases to avoid disqualifying them from eligibility to receive government benefits. Practically speaking, the Trust names a trustee, which sometimes can be a family member, to manage assets for the beneficiary with a disability. Then the trustor transfers assets to the SNT so they are not counted as the disabled person’s personal resources for Social Security (SSI) or Medicaid eligibility. A properly structured and funded SNT provides a protected financial safety net. In other words, a SNT can ensure that funds can be used to enhance comfort and independence of a disabled beneficiary without impacting their eligibility for government benefits.
Did You Know? There are Several Types of Special Needs Trusts:
- First-Party (Self-Settled) SNT – Funded with the beneficiary’s own assets. However, this requires approval from the state and is subject to Medicaid estate recovery after death.
- Third-Party SNT – Funded by someone other than the beneficiary (i.e., parents or relatives.) However, this type of Trust is not typically subject to Medicaid payback, allowing remaining funds to pass to other family members after the death of the disabled beneficiary. In other words, the unused trust funds may be able to stay within the family or donated to a charity after the loved one passed away and some trust funds are left over.
- Pooled Special Needs Trust – Combines multiple beneficiaries’ funds under nonprofit management of a trust. Each participant has their own sub-account --- however, trust assets are invested collectively.
Molly Burke is a disability and inclusion advocate who lost most of her vision at age 14. She shared her experience navigating life with a vision loss disability in her memoir, Unseen: How I Lost My Vision but Found My Voice. Her story embodies the purpose behind ABLE Accounts and Special Needs Trusts — helping individuals with disabilities safeguard their dignity and provide the freedom to thrive.
“When I lost my sight, I also lost my sense of belonging or awhile. But when I found others who understood – people walking a similar path – I realized I didn’t have to do it alone. Community, love, and support make all the difference.”
--- attributed to Molly Burke
ABLE Accounts (“Achieving a Better Life Experience”)
Unlike a SNT, an ABLE account is a tax-advantaged financial tool that allows individuals with disabilities to save and invest their own funds while maintaining eligibility to critical benefits like SSI and Medicaid. ABLE accounts are available nationwide and relatively easy to set up. They are also flexible to permit everyday living expenses. These financial tools share the same core goal as SNTs – to help people with disabilities and their families build long-term financial security, provide funds for special care needed to provide stability and comfort to beneficiaries with disabilities.
What You Need to Know
- The disability must have occurred before age 26
- Eligibility is proven through SSI/SSDI benefits or by a physician’s diagnosis
- One ABLE account per person, but anyone may contribute
- The annual contribution is capped at the federal gift tax exclusion
- Disabled beneficiaries who are employed may contribute additional funds
- ABLE accounts have low annual and fixed fees
Did You Know? When used together, SNTs can safeguard large assets, while ABLE accounts offer convenience for daily expenses.
Planning for disability-related needs demands careful legal and financial coordination. If you would like personalized guidance on how to set up a special needs trust, or advice on estate planning for those loved ones with disabilities, contact our office at intake@collinsfamilylaw.com and our team will schedule a consult with one of our experienced attorneys.
If you are in need of assistance, the attorneys at Collins Family & Elder Law Group can help.
