Caring for a family member with a physical, intellectual or emotional disability can be costly. Everyday expenses can include food and shelter, specialized medications, assistive devices, special education, transportation, at-home nursing care, and much more. Over time, these expenses will almost certainly increase. Families must engage in advanced planning to ensure that a loved one continues to receive the care they require long after parents or other benefactors are gone.
Maintaining Government Benefits
The U.S. government provides families of all income levels with disability benefits, such as Medicaid and Supplemental Security Income (SSI), to help fund the personal and financial needs of a disabled family member. However, these entitlements can disappear if the beneficiary has income or assets that exceed $2,000. Recipients can quickly exceed this threshold when they receive an inheritance, divorce settlement or personal injury legal settlement. To avoid this scenario, families should consider developing comprehensive estate plans to protect a family member’s eligibility for need-based government entitlements while preserving assets intended to pay for that individual’s ongoing care and quality of life.
What is a Special Needs Trust?
Special Needs Trusts allow families to set aside cash, real estate, life insurance proceeds or other assets to provide quality-of-life care to disabled loved ones without jeopardizing their right to receive government benefits. Neither the assets held in trusts nor the income those assets generate are considered to be owned by the beneficiaries and, therefore, do not disqualify individuals from receiving public assistance. Moreover, when trusts distribute assets directly to providers of products or services rather than to the beneficiaries, they preserve disabled family members’ eligibility for government benefits.
Special Needs Trusts also ensure proper management of trust funds by qualified third-party trustees, who are responsible for investing trust assets and deciding when and how distributions are made. In addition, because these individuals prevent beneficiaries from accessing the trust at will, they also protect trust assets from potential fraud or misappropriation by others.
Who Should a Family Select to Serve as a Special Needs Trustee?
Families have options when selecting and paying fees to professional fiduciaries overseeing Special Needs Trusts. Examples include corporate trustees affiliated with bank or trust companies, lawyers, accountants, financial advisors or other professionals with whom the family already has an existing relationship and good rapport. Alternatively, families may choose fellow family members to serve as trustees when they are not parents, spouses or other individuals legally required to support the beneficiary. Regardless of whom a family names as trustees, they should also engage a team of professional advisors to navigate the complex legal and financial issues that will arise with Special Needs Trusts.
How can a Family Establish a Special Needs Trust?
After consulting with financial and legal advisors, a benefactor may choose to establish a Third-Party Special Needs Trust to hold assets for the benefit of another individual. Not only does this type of trust protect a beneficiary’s eligibility for government benefits, but it may also allow the benefactor to remove assets from their taxable estate and minimize or eliminate their exposure to estate and gift taxes.
Alternatively, some states, including Florida, allow families to rely on a Pooled Special Needs Trust that a non-profit charitable organization manages and maintains on behalf of the beneficiary.
Finally, a disabled individual under 65 years of age who receives government benefits may qualify to fund a Self-Settled Special Needs Trust with the assets they receive from a legal settlement. With this type of trust, however, the benefactor may incur tax consequences, and their estate may be required to reimburse the government with any trust asset remaining after their death.
Caring for a child or other family members with a disability can be challenging, especially when a family fails to plan and prepare early for the financial, medical and other long-term needs of a loved one. Estate planning under the guidance of experienced financial and legal professionals will go a long way toward ensuring confidence and more than adequate care and quality of life for family members challenged with disabilities.
About the Author: Lee F. Hediger is a co-founding director with Provenance Wealth Advisors (PWA), an Independent Registered Investment Advisor affiliated with Berkowitz Pollack Brant Advisors + CPAs and a registered representative with PWA Securities, LLC. He can be reached at the firm’s Fort Lauderdale, Fla., office at (954) 712-8888 or info@provwealth.com.
Provenance Wealth Advisors (PWA), 200 E. Las Olas Blvd., 19th Floor, Ft. Lauderdale, FL 33301 (954) 712-8888.
Lee F. Hediger is a registered representative of and offers securities through PWA Securities, LLC, Member FINRA/SIPC.
This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.
Any opinions are those of the advisors of PWA and not necessarily those of PWA Securities, LLC. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of PWAS, we are not qualified to render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional. Prior to making any investment decision, please consult with your financial advisor about your individual situation.
To learn more about Provenance Wealth Advisors financial planning services click here or contact us at info@provwealth.com
Updated on March 7, 2025