Trusts, wills, and the estate plan

How to leave your child money without taking their benefits away

Here is the trap, stated as plainly as it deserves. To keep SSI and, in many cases, Medicaid, a person generally cannot hold more than $2,000 in countable assets. So when a well-meaning grandparent leaves your child $30,000, or an aunt names them on a life insurance policy, the money arrives and the benefits stop — the nursing, the therapies, the equipment, the waiver slot you waited seven years for. The family loses far more than it gained.

Third-party special needs trust

The workhorse of this plan. It holds money that was never your child's — yours, a grandparent's, a sibling's — and a trustee spends it for your child's benefit without the funds counting as their resource. It can be set up now as a standalone trust that relatives can name in their own documents, or created inside your will to spring into existence at your death. Because the money was never legally the child's, there is no Medicaid payback when they die; whatever remains passes to whoever you name.

First-party special needs trust

For money that is already your child's: a personal injury settlement, back benefits, or an inheritance that landed in their name before anyone caught it. Also called a d4A or self-settled trust. It must be established before the beneficiary turns 65, and federal law requires it to repay Medicaid from whatever is left at death. It is a rescue tool rather than a plan — but it is a very good rescue tool, and it is often the difference between keeping benefits and spending a settlement down to zero.

Pooled trust

A nonprofit pools many beneficiaries' sub-accounts for investment while accounting for each separately. Practical when the amount is too small to justify a corporate trustee, or when no family member is suitable to serve. Ask about the fee structure and what happens to the remainder.

ABLE account or trust? Both.

They do different jobs, and families who understand this use them together.

• ABLE is the checking account. Your child controls it, spending is simple, and there's no trustee to ask. In 2026 the cap is $20,000 a year from all sources, balances up to $100,000 are ignored for SSI, and eligibility requires disability onset before age 46.
• The trust is the vault. No contribution ceiling, no balance limit, professional management, and it survives you. Use it for the inheritance, the life insurance proceeds, and anything large.
• A common structure: relatives leave money to the third-party trust, and the trustee moves an allowance into the ABLE account each year for day-to-day spending.
• Ask your attorney about Medicaid recovery against ABLE balances at death — treatment varies by state and has been changing. It's a question, not an assumption.

Choosing a trustee

This decision outlasts you and it's the one families get most wrong. A sibling who loves your child may still be twenty-eight, broke, and unqualified to manage investments and benefits rules. A bank will follow the rules perfectly and has never met your child.

• Consider a co-trustee structure: a corporate or professional trustee for money and compliance, a family member for judgment about your child's life.
• Name successors — two deep, at least. Trusts fail when the named trustee dies, moves, or quits and nobody is next.
• Ask what the trustee charges, what the minimum account size is, and whether they've administered a special needs trust before. Not all have.
• Tell whoever you name, while you're alive, what you expect. Do not let them find out from a lawyer.

Funding it

A trust with nothing in it protects nothing. Most families fund the trust with life insurance — often a second-to-die policy on both parents, which pays when the second one dies and is usually cheaper than two individual policies. Retirement accounts need particular care: federal law treats a disabled beneficiary as an eligible designated beneficiary who can still stretch distributions, but only if the trust is drafted to qualify. Say the words "see-through trust and eligible designated beneficiary" to your attorney and see whether they nod.

The letter of intent

Not a legal document, and the most important thing in the folder. It is what tells the next person how to care for your child when you cannot explain it yourself. Write it badly this month rather than perfectly never, and update it once a year. Include:

• Daily routine, hour by hour, and what happens when it's disrupted
• How your child communicates — including the signs only you can read
• Medical history, current providers, equipment, and what "a bad day" looks like
• Foods, music, people, and places they love, and the ones that frighten them
• What good care looks like to you, and what you would never want done
• Religion, culture, and the traditions your family keeps
• Who to call, in order

The rest of the file

• A will that names a guardian for minor children and directs everything for your child into the trust
• Powers of attorney and a health care surrogate for yourself — your incapacity is the emergency nobody plans for
• HIPAA authorizations, so the person stepping in can actually get information
• Guardian advocacy or supported decision-making documents for a child turning 18 — see Tab L
• Beneficiary designations reviewed on everything: retirement accounts, life insurance, bank accounts, and the old policy from a job you left in 2009

Choosing an attorney

Ask how many special needs trusts they drafted in the last year. Ask whether they handle benefits eligibility and guardianship or only estate documents. Ask for a flat fee. A general estate attorney doing this occasionally can produce a document that is technically valid and still costs your child their benefits — the drafting details are unforgiving. Florida has attorneys board certified in elder law who do this work daily; that certification is a reasonable filter.

Revisit when any of this happens

• Your child turns 18, or turns 22 and leaves school
• A settlement, inheritance, or lottery-sized gift arrives
• A trustee or guardian named in your documents dies, divorces, or moves away
• You move to another state — benefits rules and trust law are both state-specific
• Five years pass without a review

This section describes how these tools generally work. It is not legal advice, and none of it should be used to draft or sign anything without a Florida attorney who does special needs planning.

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