Special Needs Planning and Your Estate
If you have a child or loved one with special needs, estate planning is essential. One of the most effective tools for protecting their future is a third-party special needs trust, also called a supplemental needs trust.
This type of trust allows you — or other family members — to leave money or assets for your loved one’s benefit without jeopardizing their eligibility for public benefits such as Medicaid or SSI.
Goals of a Special Needs Trust
A well-structured special needs trust can:
- Leave funds for your child or elderly family member without causing the loss of public benefits
- Ensure the funds are professionally managed and protected
- Avoid overburdening other family members with caregiving or financial responsibilities
- Distribute assets fairly among all children or heirs
- Provide enough resources to meet your loved one’s long-term needs
Some parents choose to leave additional assets to siblings and nothing directly to the child with special needs, hoping the sibling will manage the money and provide care. However, this approach carries risks:
- Public benefits programs are only supplemental and rarely cover all needs
- Sibling caregivers may become overwhelmed or experience resentment
- Circumstances and government programs can change, leaving gaps in care
A properly drafted special needs trust avoids these problems, protects family relationships, and creates a sustainable care plan.
Understanding the SECURE Act and Special Needs Planning
The SECURE Act, effective January 1, 2020, made significant changes to retirement account distributions that impact special needs planning.
What Stays the Same
The goal remains the same: use a properly drafted third-party special needs trust (often an accumulation trust) to manage retirement assets while maintaining public benefit eligibility and providing a lifetime “stretch” of IRA or retirement account distributions for the beneficiary.
What Changed
The SECURE Act introduced a new 10-year payout rule for retirement assets after the account owner’s death. This accelerates taxation and can reduce the long-term value of inherited retirement accounts.
Eligible Designated Beneficiaries (EDBs)
Some beneficiaries still qualify for lifetime payouts rather than the 10-year limit. These include:
- Surviving spouses
- Minor children of the account owner
- Individuals with disabilities
- Chronically ill individuals
- Beneficiaries less than 10 years younger than the account owner
Proper planning ensures that your special needs trust qualifies for this favorable treatment whenever possible, helping to preserve retirement assets for your loved one.
Unanswered Questions
There are still some uncertainties about how the SECURE Act applies to special needs trusts. For example:
- Can remainder beneficiaries be disregarded when determining the payout period for an EDB?
- Can an EDB who is a minor retain EDB status past age 21 if also disabled?
- Can disability be certified using SSI, SSDI, or Medicaid eligibility rather than a separate certification process?
An experienced elder law attorney can guide you through these complex rules and make sure your plan stays compliant with changing laws.
Why Work with an Elder Law Attorney
Special needs planning is complex and highly individualized. An elder law attorney with expertise in special needs planning can:
- Help you understand available public benefits (SSI, SSDI, Medicare, Medicaid, SNAP, housing assistance)
- Draft and properly fund a third-party special needs trust
- Identify a trustworthy and capable trustee to manage distributions
- Coordinate with therapists, care managers, and service providers
- Develop a “circle of support” so care responsibilities are shared
Taking these steps now gives your loved one security, stability, and the best possible quality of life — even when you are no longer there to advocate for them.
Take the First Step
Special needs planning is about protecting your child’s future and your family’s peace of mind.
We’d love to help you create a comprehensive plan that ensures your loved one’s care and financial security. Call us at (207) 848-5600 or visit our Contact Page to schedule a consultation today.
