Special Needs Planning: When and Why Your Estate Plan Should Include It

If you have a loved one with a disability or one who is not financially responsible, whether a child, sibling, or aging parent, your estate plan should include special needs planning or discretionary trust planning.

Many families assume that providing an inheritance or naming a caretaker is enough. Unfortunately, without proper planning, these well-intentioned choices can unintentionally disqualify a person with special needs from essential public benefits like Medicaid or Supplemental Security Income (SSI).

In this blog post, we will explore when special needs planning is necessary, why it matters, and how Massachusetts families can take steps to protect their loved ones now and in the future.

What Is Special Needs Planning?

Special needs planning refers to legal strategies that ensure individuals with disabilities can benefit from your estate, without losing eligibility for government programs that depend on finances.  It often involves tools like Special Needs Trusts (SNTs), Supplemental Needs Trusts, Guardianship alternatives, and creative planning to support independence and financial stability.

When Do You Need Special Needs Planning?

You should consider special needs planning if any of the following apply:

• A family member receives or may receive Medicaid, SSI, or housing assistance

• You provide ongoing care or financial support for someone with a disability

• Your child or grandchild has been diagnosed with a developmental or intellectual disability

• A loved one struggles with a mental health condition that affects decision-making or employment

• You are worried about how your death or incapacity could impact a dependent adult

• You want to include someone to inherit your assets who has questionable capacity to manage the funds responsibly.

Even high-functioning individuals can benefit from protection, especially if they are vulnerable to financial exploitation, lack full independence, or are prone to making bad decisions.

Why Is Special Needs Planning So Important?

1. Preserves Access to Public Benefits

Means-tested programs like Medicaid and SSI have strict income and asset limits. A direct inheritance—even a modest one—can make someone ineligible, triggering a suspension of crucial services. A properly drafted special needs trust allows assets to be held for their benefit without being counted against them.

2. Provides Financial Security Without Oversight

Special Needs Trusts are managed by a trustee.  A trustee, is a person, you choose, who uses the funds for expenses not covered by government programs, like personal care, education, travel, and medical devices. This offers a structured, secure way to enhance quality of life without court involvement.

3. Offers Peace of Mind

You will know your loved one will be cared for, even if you’re no longer around. You can name successor caregivers, specify care preferences, and avoid leaving those decisions up to chance or the courts.

4. Protects Against Exploitation

People with disabilities, especially those with cognitive or intellectual challenges, can be targets for scams and financial abuse. Special needs planning limits direct access to money while ensuring responsible support.

Key Tools in Special Needs Planning

• First-Party Special Needs Trusts: These trusts are funded with the individual’s own assets (e.g., lawsuit settlement or inheritance). When the beneficiary dies, there is a required payback provision to Medicaid, to be paid back for the money spent on that person’s care. It is better to avoid this by establishing a Third Party Trust.

• Third-Party Special Needs Trusts: These trusts are funded by anyone but the person benefiting from the trust. They are often created by parents, grandparents, or other relatives. There is no payback requirement.

• Discretionary Trusts: These trusts are created when you have a loved one who may not be diagnosed with a disability, but you are concerned about their judgement or ability to make good decisions with the money or assets you plan to leave them.  The distributions are completely at the discretion of the trustee.

Letter of Intent

When planning for your loved one, a letter of intent allows you to communicate important information to future caregivers.  You might want to include information about your wishes for your loved one, their preferences, daily routines, preferred caregivers, and any information to guide your trustee. 

Avoiding Common Mistakes

• Leaving an inheritance directly to a disabled person

• Naming them as a beneficiary on retirement accounts or life insurance

• Failing to fund or administer a trust correctly

• Assuming siblings will “just take care of things” informally

These mistakes are easily avoidable with the right guidance and planning.

Plan Today, Protect Tomorrow

Special needs planning helps you to secure your loved one’s future.

At Senior Solutions Attorneys at Law, we help Massachusetts families by creating custom plans to protect assets, preserve benefits, and support independence.

If you have a loved one with a disability or someone who struggles with managing finances responsibly, we can help you plan.  We invite you to schedule a consultation. Please don’t wait to plan until it is too late.

Senior Solutions, Attorneys at Law, is an Estate Planning and Elder Law firm serving the Greater Boston, Massachusetts area since 2001. We are ready to help you with Medicaid Planning, Estate Planning, Probate, Guardianship & Conservatorships, Special Needs Trusts, and Fiduciary Services. We are here to help. Please call our office at 617-489-5900 or schedule a consultation by clicking below:

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