Special Needs Financial Planning

A special needs trust (SNT) holds assets for a person with a disability without affecting their eligibility for SSI, Medicaid, or other means-tested benefits. Assets inside the trust can pay for goods and services that Medicaid doesn't cover — like technology, recreation, transportation, and more. There are different types: first-party trusts (funded with the disabled person's own assets), third-party trusts (funded by family), and pooled trusts. Each has different rules and requirements.

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ABLE accounts are tax-advantaged savings accounts for people with significant disabilities that began before age 26. Funds in an ABLE account do not count against SSI resource limits (up to $100,000), allowing people to save money while maintaining benefits. Funds can be used for qualified disability expenses including education, housing, transportation, health, and more. ABLE accounts are simpler and less expensive than trusts for many families.

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SSI has a strict resource (asset) limit of $2,000 for an individual and $3,000 for a couple. Exceeding this limit can result in loss of SSI and sometimes Medicaid. This is why special needs trusts and ABLE accounts are so important — they provide ways to hold and grow assets without triggering this limit. Understanding SSI asset rules is a critical foundation for all disability financial planning.

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A letter of intent is not a legal document — it is a detailed guide for future caregivers describing the disabled person's daily routines, preferences, medical needs, communication style, and wishes. It helps ensure continuity of care if primary caregivers are no longer able to provide support. Families are encouraged to write one and update it regularly.

Some families use life insurance — particularly second-to-die policies — as a funding mechanism for third-party special needs trusts. The idea is to ensure the trust is funded when parents pass, without requiring accumulation of large liquid assets during the parents' lifetimes. This is an area where consulting a financial planner with disability planning expertise is strongly recommended.

Disability financial planning intersects with estate law, benefits law, tax law, and Medicaid rules. Mistakes can have serious consequences. The Special Needs Alliance (specialneedsalliance.org) maintains a directory of attorneys with expertise in special needs planning. Consider working with both a special needs attorney and a financial planner who understands disability benefit rules.