Estate Planning, Trusts, and Accounts

Parents and guardians that have children with special needs must plan with care so that income and assets can be used in the best interest of their child. With careful legal and financial planning, parents can make sure that their children have a good quality of life as time goes on. Proper planning will allow your child to have the services he needs, such as Social Security (SSI) and Medicaid, without being penalized for having assets from sources such as a gift from family or income from a lawsuit. We hope this page will help you start to build familiarity with all that goes into planning for your child’s long-term future.

What is involved in Estate Planning?

Estate planning looks different for each family. Getting started can be the hardest part. We suggest that you start by talking to a professional financial planner and/or a lawyer who has experience working with parents of children with special needs. An expert will know the challenges, rules, and details of Medicare, SSI, guardianship, and other issues of concern for you and your family. An expert will be able to give you advice about trusts and accounts you can set up for your child.

Finding answers to hard questions about finances can ease worries about your child’s future. The steps below can help you get started:

Talk to a financial planner and/or a lawyer

  • Many law firms and life insurance companies have special needs consultants.
  • Make sure to find one who is skilled in special needs trusts and planning.

Write a letter of intent

  • Some parents have found it helpful to write a draft letter of intent, or simply jot down their concerns before meeting with a planner or lawyer to write the letter of intent.

Establish guardianship (and successors) if needed

  • A Guardianship and Alternatives is a legal relationship in which a person is designated by law to make choices for another person.
  • The guardian is appointed by a judge to act in support of someone who cannot manage his or her own affairs.
  • Guardianships are often thought of as something for children, as they cannot make legal decisions for themselves, but guardianships also can be used to protect adults with disabilities.
  • If you are planning to care for your child after they turn age 18, you will need to set up guardianship.
  • Talk with a special needs consultant about guardianship choices.

Consider your child's financial needs

Special Needs Trusts

One way of providing for your child with special needs is through a Special Needs Trust (SNT). Also called a “supplemental care trust,” an SNT is a legal way to make sure that the assets you leave to your child are available when he or she needs them. An SNT gives your child use of funds, while the assets are handled responsibly. This section explains SNTs: their benefits, proper uses, and how you can fund an SNT for your child. It also goes over revocable trusts, which can be set up along with your child’s SNT.

What are the benefits of a Special Needs Trust?

The services and funds through government programs, such as Medicaid, are helpful for medical and long-term care, but the income from these programs is quite fixed, often leaving many unmet needs. If you leave money to your child in a traditional will, it is looked at as an asset, disqualifying your child from any public benefits if the amount is too high. All the money in the will must be used before your child’s eligibility will be restored. This would leave only those funds from government benefits for your child’s long-term care and other expenses. To be sure that the money you leave for your child can be used for their needs, and that public benefits such as Medicaid will continue, the assets must be placed in the SNT and set up the right way.

What are acceptable uses for SNT funds?

The SNT must be designed clearly to add to, not replace, government benefits. Money from the trust cannot be given to the person with a disability. Instead, it must be transferred to third parties to pay for the needs of the person with a disability. The SNT may be used for expenses such as those Medicare and/or Medicaid will not cover:
  • Out-of-pocket medical and dental expenses, nutritional needs, eyeglasses Rehabilitation/therapy
  • Transportation (public or private), car maintenance, insurance
  • Personal care aide or escort • Hobbies, recreation, sports, entertainment, travel or vacation
  • Assistive technology, computer or electronic devices
The trust may NOT be used for food, shelter, and clothing. When setting up the trust, make sure to work with a lawyer who has experience with these type of trusts and is familiar with how the money can be used.

How can I fund an SNT for my child?

Some ways of funding a special needs trust are:
  • Insurance
  • Savings and investments, such as money in retirement funds
  • Support and gifts from friends and family members
  • Property, such as a family home
  • Military benefits
The money in the trust can be invested and earn money without limits. The assets and earnings belong to the trust, not the child.

Who will serve as trustee for your child?

Choosing the right person or people to handle your child’s SNT is a key step. The trustee will be in charge of spending the money, knowing the laws that govern it, and completing all tasks, like filing taxes and balancing the account. Some states allow 2 trustees, check with the state you live in for SNT guidelines. The trustee(s) may be:
  • A family member, such as a sister or brother (some states do not accept family as trustees)
  • A lawyer
  • A trust manager

What is a Revocable Trust?

A revocable trust is an added fund you can set up along with your child’s SNT. You can set up this trust while you’re living, but you are allowed to make changes to it as you see fit. A revocable trust is of great value if you set it up with your will. Your assets can be funneled into the trust automatically upon your death, without the costly and time-consuming process of a will. Another advantage of this is that other family members, like grandparents, can also use the trust to gift money to your child.

ABLE Accounts

Another good option for saving money and not losing benefits is an ABLE account, which is only the cost of securing a bank account. ABLE accounts come from the ABLE Act, which amends Section 529 of the Internal Revenue Service Code of 1986 to create tax-free savings accounts for people with disabilities. By making tax-free savings accounts available to cover qualified disability-related expenses (including education, housing and transportation), this law aims to ease financial strains faced by people with disabilities. Additionally, the funds added to these accounts will not negatively impact the person’s eligibility for public benefits, such as Medicaid. The funds in these accounts don’t replace benefits provided through private insurances, the Medicaid program, the Supplemental Security Income program, the beneficiary’s employment and other sources. Instead, the funds supplement these benefits. For more information on ABLE Accounts and how to set one up, go to: ABLE National Resource Center.


Information & Support

For Parents and Patients

Financial Planning for Kids with Special Needs
Offers details about financial planning specific to special needs, including ten steps to planning your child's financial future. The site also translates to Spanish.

Planning Your Child's Future
A planning guide for parents and guardians with information about special needs trusts and much more by the Pacer Center.

Special Needs Alliance
This is a national nonprofit organization of member attorneys who work regularly with planning for special needs. The site has up to date content and a “search for an attorney” tool.

Financial Planning Mistakes Special Needs Families Should Avoid
Gives advice about things parents might not think of when planning, including seven mistakes to avoid.

Services for Patients & Families in New Mexico (NM)

For services not listed above, browse our Services categories or search our database.

* number of provider listings may vary by how states categorize services, whether providers are listed by organization or individual, how services are organized in the state, and other factors; Nationwide (NW) providers are generally limited to web-based services, provider locator services, and organizations that serve children from across the nation.

Authors & Reviewers

Initial publication: July 2014; last update/revision: September 2020
Current Authors and Reviewers:
Author: Shena McAuliffe, MFA
Reviewer: Tina Persels
Authoring history
2018: update: Tina PerselsA
2016: revision: Mindy Tueller, MS, MCHESR; Gina Pola-MoneyR
2014: first version: Shena McAuliffe, MFAR; Gina Pola-MoneyR
AAuthor; CAContributing Author; SASenior Author; RReviewer