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Estate Planning for Special Needs

Estate Planning for Special Needs

| March 04, 2022

It’s no secret that families of children with special needs must exercise special care when it comes to financial planning. Whether the child is of age or still a minor the main goal of the parent should always be the well-being of the child's future. A carefully crafted estate plan can solve the unknowns and remove the burden that most families feel when trying to allocate resources to the future of their child while also taking into consideration their eligibility for certain public benefits.


Having a will in place is a foundational piece of any estate plan, with a special needs estate plan being no exception. It ensures that your final wishes are carried out following your passing and allows your beneficiaries to receive the assets you leave for them. If you are worried about the well-being of your special needs child it’s important to have a will in place to reflect your final wishes.

Special needs trust

A Special Needs Trust, sometimes known as a Supplemental Needs Trust, differs from a regular trust in that it prevents the loss of any government benefits the child may be eligible for. The way this works is assets placed in the trust don’t count towards the beneficiary's assets for the purpose of Supplemental Security Income (SSI) or Medicaid eligibility. Funds placed in the trust can in turn be used for a wide array of needs including:

  • Assistive devices (including wheelchairs)
  • Computers and other technology
  • Insurance premiums
  • Job training expenses
  • Medical expenses that are not covered by other sources
  • Public transportation costs
  • Recreation and entertainment
  • Start-up money for a business
  • Therapy or rehabilitation costs
  • Tuition expenses
  • Vacations, including paying for a friend or family member
  • Vehicles

Types of Special Needs Trust

Special Needs Trusts aren’t a one-size-fits-all affair, there are several different types of Special Needs Trusts that may fit into a plan, depending on the situation. However, funding the trust will all depend on the type you have in place..

Third-party Special Needs Trust

Third-party trusts are the most commonly used when setting up Special Needs Trusts and they can be funded by someone other than the beneficiary. This includes parents or grandparents. There are several ways to set up a third-party trust: 

  • Stand-alone trust: This type of trust can be accessed immediately and the beneficiary doesn’t need to wait until the donor’s death has occurred.
  • Testamentary trust: This type of trust works in the opposite way of a stand-alone meaning that it will not be funded until your death has occurred.

First-party Special Needs Trust

A first-party Special Needs Trust is a trust funded by the assets or income of the individual beneficiary instead of by family and friends. As with a third-party trust, a first-party also allows the beneficiary to remain eligible for government-backed programs such as Medicaid or SSI. The main difference between the two types is that with a first-party trust, any funds that remain after the beneficiary’s life must go to reimburse the state for medical assistance it has paid on the beneficiary’s behalf.

Steps to set up your estate plan

Setting up your estate plan will require some leg work in the beginning and some reassessments over time depending on family structure and your financial outlook. One of the main goals of an estate plan for a special needs child would be to maximize benefits and assets while also minimizing the taxes they incur.

Step 1: Take an inventory of all you own

Everything you own should be included in your estate plan, by taking an inventory you can easily sift through what all you’re putting in the trust.

Step 2: Take into account your family's needs

This will include having enough life insurance, assigning a guardian, and documenting your wishes for your children.

Step 3: Review beneficiaries

Remember to name all beneficiaries as well as contingent beneficiaries in the event your original beneficiary passes before you do and the estate isn’t updated.

Step 4: Review your taxes

It’s important to assess the potential impact of taxes on your legacy; this can include income taxes, especially on IRAs and qualified retirement plans, as well as federal estate tax. Some states also impose a separate inheritance tax or estate tax.

Step 5: Seek professional counsel

In conjunction with your financial planning, seek advice from a qualified estate planning attorney to help you structure and implement your plan.

The SKG Team and your estate planning

SKG is dedicated to assisting your family in any of your financial planning needs including any unforeseen circumstances you may run into. For more information regarding general estate planning or estate planning for special needs family members feel free to schedule an appointment.