Estate Planning
Special Needs Trusts
A special needs trust (also called a supplemental needs trust) is a legal arrangement that provides for a person with disabilities without disqualifying them from means-tested government benefits like SSI and Medi-Cal. Assets in the trust supplement—but don't replace—government assistance.
A loving gift that cost everything
Michael and Sarah wanted to provide for their adult son Daniel, who has Down syndrome. They left him $150,000 in their will—enough for a lifetime of extras that would make his life richer.
Three months after they passed, Daniel received his inheritance. Within 60 days, he lost his SSI payments, his Medi-Cal coverage, and his spot in the supported living program that had been his home for eight years.
Daniel had to spend down the entire inheritance on basic care the government had been covering—then reapply for benefits. By the time he was approved again, he'd lost his apartment and his daily routine. The money meant to enrich his life had devastated it instead.
Social Security Administration:
"A direct inheritance of just $2,000 can disqualify a person from SSI and Medi-Cal benefits."
Special needs trusts protect eligibility while dramatically improving quality of life.
What Goes Wrong Without a Special Needs Trust
Well-meaning parents often leave assets directly to a child with disabilities, inadvertently causing devastating consequences. The child loses benefits and must 'spend down' the inheritance on basic needs the government would have covered.
SSI and Medi-Cal benefits are immediately terminated.
Even a modest inheritance pushes your child over the $2,000 asset limit, triggering automatic benefit loss.
Your child must spend down the inheritance on basics.
Money meant for enrichment goes to rent, food, and medical care—things benefits would have covered.
Housing and program placements may be lost.
Many supported living programs require Medi-Cal eligibility. Losing benefits can mean losing their home.
Requalifying for benefits takes months or years.
After spending down, your child faces a lengthy reapplication process with no guaranteed outcome.
A note: Planning for what happens after you're gone is one of the hardest things a parent of a child with disabilities faces. The guilt of imagining your child without you, combined with the complexity of benefits rules, can feel paralyzing. But this isn't about dwelling on worst-case scenarios—it's about giving yourself peace of mind that your child will be cared for, enriched, and protected no matter what.
How a Special Needs Trust Protects Your Child
A properly structured special needs trust holds assets for your child's benefit without disqualifying them from government programs. Your child keeps their SSI, their Medi-Cal, their housing—and gains access to funds that dramatically improve their quality of life.
Government benefits remain fully intact.
SSI cash payments and Medi-Cal health coverage continue uninterrupted.
Trust funds supplement—never replace—public benefits.
The trust pays for things government programs don't: vacations, hobbies, electronics, companion services.
Professional or family trustees manage distributions properly.
A knowledgeable trustee ensures every expenditure complies with complex benefit rules.
Lifelong care is secured with trustee succession planning.
We plan for who manages the trust after you, ensuring continuity across decades.
How a special needs trust actually works
Instead of leaving assets directly to your child, your will or living trust directs those assets into the special needs trust. Because your child never 'owns' the money, it doesn't count against their benefit limits.
The trustee—a family member, professional fiduciary, or combination—manages the trust according to your instructions. They can pay for therapies not covered by Medi-Cal, educational programs, travel, entertainment, personal care attendants, adaptive equipment, and virtually anything that enriches your child's life.
The key restriction: the trust cannot pay for food or shelter directly in most cases, as those are what SSI is meant to cover. But everything else—the things that make life worth living—the trust can provide.
Types of Special Needs Trusts
The right trust structure depends on where the money originates and your family's specific situation:
Third-Party Special Needs Trust
Funded by parents, grandparents, or others. No Medicaid payback requirement—remaining funds pass to your other beneficiaries.
First-Party Special Needs Trust
Holds your child's own money (like an inheritance or personal injury settlement). Requires Medicaid payback at death, but preserves current benefits.
Pooled Trust
Managed by a nonprofit organization. Good option when professional management is preferred or trust amounts are smaller.
ABLE Account Integration
Can work alongside your special needs trust for smaller, more accessible savings with different rules.
Most families complete their estate plan in 2-3 weeks, entirely online. See how it works
Frequently Asked Questions
Who should be the trustee of a special needs trust?
Choose someone who understands both the beneficiary's needs and government benefit rules. Many families select a trusted family member and name a professional fiduciary as backup. The trustee must carefully track expenses to maintain benefit eligibility.
What happens to the trust when my child passes away?
For third-party trusts, you decide who receives the remaining assets—typically siblings or other family. For first-party trusts, Medicaid must be reimbursed for benefits paid during the beneficiary's lifetime, with any remainder going to your designated beneficiaries.
Can my child with disabilities live independently with a trust?
Yes. The trust can pay for housing-related costs, utilities, and support services that enable independent or semi-independent living. We'll structure distributions to maximize independence while protecting benefits.
How much should I fund a special needs trust?
This depends on your child's needs, life expectancy, and other resources. We'll help you estimate lifetime costs and consider life insurance as a funding mechanism if needed. Many families also encourage grandparents to contribute.
What can the trust pay for without affecting benefits?
Almost anything that improves quality of life: education and training programs, therapy not covered by Medi-Cal, personal care attendants, vacations, hobbies, entertainment, technology, home modifications, accessible vehicles, adaptive equipment, dental care, vision care, and mental health services.
Ready to Protect Your Family?
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Last updated: January 2025