Planning for your own financial future can be time-consuming, but when it comes to planning for your family’s financial future, it can seem overwhelming. This is especially apparent when a loved one has a developmental disability or special needs requirement, and you just want to do what is best for them. With proper planning and risk management, you can provide long-term security and achieve peace of mind. The main points we will focus on include ensuring access to essential resources, preserving government benefits and preparing for future care.
The governmental benefits that someone with special needs may be entitled to can be very effective in supporting expenses for food, housing, healthcare and other basic living expenses. The nuance is that they are only eligible for these benefits if they have ownership of assets under a certain threshold. If assets for an individual are above $2,000, they will likely lose their eligibility to receive any government benefits. A few of these government benefits include Social Security Disability Insurance (SSDI), Supplemental Security Income (SSI), Medicaid, Medicare and state programs.
A Special Needs Trust (SNT) is a great way to ensure the assets are below the threshold. The assets are now placed in trust and managed by a trustee so that they will not jeopardize the eligibility for any government assistance programs. Unlike a normal trust, where money is set aside for health, education, maintenance, retirement, and legacy planning, an SNT specifically excludes expenses covered by the government. Therefore, the trustee can provide discretionary funding for quality-of-life issues. Upon the passing of the beneficiary, the trustee will rely on the government for expenses covered during their life. The assets in the SNT can either be contributed by the first party (assets belonging to the beneficiary), third party (assets belonging to someone other than the beneficiary, or pooled (gather funds from multiple families and other donors).
An alternative option is The Achieving a Better Life Experience (ABLE) account. Similar to the SNT, the money in the ABLE account does not count towards their own assets and thus will not affect their eligibility for any governmental benefits. This account is set up as a tax-advantaged savings account, which can be used for qualified disability expenses including accessible housing/transportation, personal assistance services, health care not covered by insurance, etc. In order to be eligible, the beneficiary’s disability must have begun prior to turning 26.
When determining which vehicle to use, we look at the desired funding, complexity and special circumstances. Typically, an SNT is used for long-term planning since you can fund it with no restrictions. A trustee will be established to manage the trust and this will typically require legal assistance to establish. An ABLE account is more of a savings account that the beneficiary or an authorized representative can manage and access for qualified expenses and although they are easier to establish, there is a contribution limit of $19,000/year in 2025.
Every family situation is unique and should be treated as such. By putting the proper planning strategies in place, you can provide your loved one with financial security, maintain critical benefits, and ensure an ongoing quality of life. If this is something that you believe could help or something that you would like to learn more about, please do not hesitate to reach out and we can discuss whether this is the right next step for you and your family.
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