Can a person with a disability receive an inheritance without losing benefits?

Yes, but only if proper planning is in place. If the inheritance is left directly to the individual, it becomes a countable resource that can disqualify them from SSI and Medicaid. However, if the inheritance is directed into a properly drafted special needs trust — either through the family member's estate plan or by the beneficiary establishing a first-party trust after receiving the funds — benefits can be preserved.

What is an ABLE account and who qualifies?

An ABLE account is a tax-advantaged savings account authorized by the ABLE Act of 2014 for individuals whose qualifying disability began before age 26. The account allows savings up to $100,000 without affecting SSI eligibility. Funds can be used for qualified disability expenses including education, housing, transportation, healthcare, and assistive technology. Earnings in the account grow tax-free.

What expenses can a special needs trust pay for?

A special needs trust can pay for a wide range of expenses that supplement government benefits, including education and tutoring, recreation and entertainment, personal care attendants, transportation and vehicle modifications, electronics and technology, vacations, dental and vision care not covered by Medicaid, therapy, and home furnishings. The trust should generally avoid making direct cash payments to the beneficiary, as cash is counted as income for SSI purposes.

Do we need a guardian for our adult child with a disability?

Not necessarily. Guardianship is the most restrictive option and removes significant legal rights from the individual. Many states now recognize supported decision-making agreements as a less restrictive alternative, allowing the person with a disability to retain autonomy while receiving help from trusted advisors. Limited conservatorships, healthcare proxies, and representative payee designations may also meet the family's needs without a full guardianship.

What happens to a special needs trust when the beneficiary dies?

For a first-party special needs trust, remaining funds must first reimburse the state Medicaid agency for medical assistance paid during the beneficiary's lifetime. Any balance after Medicaid reimbursement passes to the remainder beneficiaries named in the trust. For a third-party special needs trust, there is no Medicaid payback requirement, and the remaining assets pass to the designated remainder beneficiaries, typically other family members.

How much can a person with a disability have in assets and still qualify for SSI?

SSI imposes a countable resource limit of $2,000 for an individual and $3,000 for a couple. However, certain assets are excluded, including the primary residence, one vehicle, household goods, personal effects, and assets held in a properly drafted special needs trust or ABLE account (up to $100,000). Careful asset structuring is essential to maintaining eligibility.

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42.5 Million (13%)

Americans with a Disability

Source: U.S. Census Bureau, American Community Survey 2023

7.4 Million

SSI Recipients (Aged, Blind, Disabled)

Source: Social Security Administration, SSI Annual Statistical Report 2023

$2,000

SSI Countable Resource Limit (Individual)

Source: Social Security Administration

$60,000–$120,000+

Average Annual Cost of Residential Care for Individuals with Disabilities

Source: AARP / Genworth Cost of Care Survey 2023

About Special Needs Planning

Special needs planning is the legal discipline focused on securing the financial future of individuals with physical, intellectual, or developmental disabilities without disqualifying them from essential government benefit programs such as Supplemental Security Income (SSI), Medicaid, and Social Security Disability Insurance (SSDI). The cornerstone of special needs planning is the special needs trust (SNT), also known as a supplemental needs trust, which holds assets for the benefit of a person with a disability while preserving their eligibility for means-tested public benefits. These trusts are designed to supplement — not replace — government assistance by covering expenses that public programs do not provide, such as education, recreation, personal care attendants, transportation, technology, and quality-of-life enhancements.

Federal law under 42 U.S.C. § 1396p(d)(4) recognizes several types of special needs trusts. First-party or self-settled special needs trusts (also called d4A trusts) are funded with the disabled individual's own assets — often from a personal injury settlement, inheritance, or retroactive benefit payment — and must include a Medicaid payback provision. Third-party special needs trusts are funded by someone other than the beneficiary, typically parents or grandparents, and do not require Medicaid payback upon the beneficiary's death. Pooled trusts under 42 U.S.C. § 1396p(d)(4)(C) are managed by nonprofit organizations and allow individuals of any age to participate, with remaining funds benefiting the nonprofit after the beneficiary dies.

Special needs planning extends well beyond trust creation. It encompasses ABLE accounts authorized under the Achieving a Better Life Experience Act, guardianship and conservatorship proceedings, supported decision-making agreements, government benefit optimization, coordination with estate plans of family members, letter of intent preparation, and long-term residential and care planning. Effective special needs planning requires an attorney who understands the intersection of trust law, public benefits law, tax law, and disability rights — because a single misstep, such as an improperly structured inheritance or gift, can immediately disqualify a beneficiary from the government programs they depend on for healthcare and daily living.

Why You Need a Special Needs Planning Attorney

The stakes in special needs planning are extraordinarily high. According to the U.S. Census Bureau, approximately 42.5 million Americans — roughly 13% of the civilian noninstitutionalized population — have a disability. Many of these individuals depend on means-tested government benefits that impose strict asset and income limits. For SSI, the countable resource limit is just $2,000 for an individual. Receiving even a modest inheritance, personal injury settlement, or gift directly — without proper trust planning — can push a beneficiary over this threshold and trigger an immediate loss of SSI, Medicaid, and related benefits.

The consequences of benefit disqualification can be devastating. Medicaid often provides the only viable source of comprehensive healthcare coverage, including personal care services, therapies, prescriptions, and residential support that would cost tens of thousands of dollars per month if paid privately. Families who fail to plan may inadvertently harm the very person they intended to help. Special needs planning ensures that individuals with disabilities can receive supplemental financial support for quality-of-life needs while maintaining uninterrupted access to the government programs that fund their essential care, housing, and medical treatment.

Common Special Needs Planning Cases

Third-Party Special Needs Trust Creation

Parents or grandparents establish a trust funded with their own assets to provide for a child or grandchild with a disability after their death, without jeopardizing the beneficiary's SSI or Medicaid eligibility.

First-Party Special Needs Trust for Settlements

A person with a disability receives a personal injury settlement, inheritance, or back payment of benefits and must place the funds into a self-settled special needs trust to maintain eligibility for means-tested programs.

ABLE Account Establishment

Opening a tax-advantaged ABLE (Achieving a Better Life Experience) account for an individual whose disability onset occurred before age 26, allowing them to save up to $100,000 without affecting SSI eligibility.

Pooled Trust Enrollment

An individual over age 65 or without a parent or guardian available to create a trust enrolls in a nonprofit-managed pooled trust to shelter assets while preserving Medicaid and SSI benefits.

Guardianship and Alternatives

Families petition for legal guardianship or conservatorship for an adult child with a disability, or pursue less restrictive alternatives such as supported decision-making agreements or limited conservatorships.

Coordinating Family Estate Plans

Reviewing and restructuring the wills, trusts, and beneficiary designations of parents and other family members to ensure no direct inheritances inadvertently disqualify the individual with a disability from benefits.

Letter of Intent Preparation

Drafting a comprehensive non-legal document that provides future caregivers and trustees with detailed information about the beneficiary's daily routine, medical needs, preferences, social connections, and care goals.

Trust Administration and Compliance

Advising trustees on permissible distributions from a special needs trust, ensuring that payments are made in ways that do not count as income or resources that would reduce or eliminate the beneficiary's public benefits.

Typical Special Needs Planning Case Timeline

Initial Consultation and Needs Assessment

1–2 weeks

The attorney meets with the family to understand the beneficiary's disability, current and future government benefits, existing assets, family resources, and long-term care goals.

Benefit Eligibility Analysis

2–4 weeks

The attorney reviews the beneficiary's current SSI, Medicaid, SSDI, and other benefit statuses to determine which planning strategies will preserve eligibility while maximizing available resources.

Trust Design and Drafting

3–6 weeks

The attorney designs and drafts the appropriate trust instrument (first-party, third-party, or pooled) along with any companion documents such as a letter of intent, powers of attorney, or guardianship petitions.

Execution and Funding

2–4 weeks

Trust documents are signed, and assets are properly funded into the trust. The attorney ensures beneficiary designations and family estate plan documents are coordinated with the special needs trust.

Government Benefit Coordination

2–6 weeks

The attorney or benefits specialist notifies the Social Security Administration and Medicaid of the trust, providing documentation as needed to confirm the trust is compliant and does not constitute a countable resource.

Ongoing Trust Administration Guidance

Ongoing

The attorney provides continuing advice to the trustee on permissible distributions, record-keeping, annual accountings, and responding to inquiries from government agencies to maintain the beneficiary's benefit eligibility.

Know Your Rights

A properly drafted special needs trust allows a person with a disability to benefit from trust assets without those assets counting as resources for SSI or Medicaid eligibility purposes.
Under the ABLE Act, individuals whose disability onset occurred before age 26 can open a tax-advantaged savings account and maintain up to $100,000 without affecting SSI eligibility.
Individuals with disabilities have the right to receive inheritances through a properly structured special needs trust rather than being disinherited to preserve benefits.
The Americans with Disabilities Act (ADA) and Section 504 of the Rehabilitation Act protect the civil rights of individuals with disabilities in employment, education, housing, and public services.
A person with a disability who receives an inheritance or settlement directly may be able to establish a first-party special needs trust within a reasonable time to preserve benefits, rather than being forced to spend down the assets.
Supported decision-making is increasingly recognized as a less restrictive alternative to full guardianship, allowing individuals with disabilities to retain more autonomy while receiving help with decisions.
Trustees of special needs trusts have a fiduciary duty to manage trust assets prudently and solely for the benefit of the person with a disability, and beneficiaries or their advocates can hold trustees accountable.

What to Look for in a Special Needs Planning Attorney

When selecting a special needs planning attorney, prioritize someone with dedicated experience in both trust law and public benefits law. This intersection is critical because special needs trusts must be drafted to comply with federal and state trust statutes while simultaneously meeting the requirements of SSI, Medicaid, and other benefit programs. Ask whether the attorney regularly drafts and administers special needs trusts, and whether they have experience with both first-party and third-party trusts. Knowledge of ABLE accounts, pooled trusts, and supported decision-making is also essential. The attorney should understand how different types of distributions from a special needs trust affect benefit eligibility — for example, that cash distributions to a beneficiary are treated differently than direct payments to third parties for goods and services. Look for membership in organizations such as the Academy of Special Needs Planners or the Special Needs Alliance, which indicate specialized focus. The attorney should be willing to coordinate with your financial planner, the beneficiary's case managers, and government agencies to ensure a comprehensive plan. Finally, the attorney should demonstrate genuine empathy and understanding of the unique concerns families face when planning for a loved one with a disability.

Questions to Ask Your Special Needs Planning Attorney

1Should we establish a first-party or third-party special needs trust, and what are the practical differences for our situation?
2How will distributions from the trust affect my family member's SSI, Medicaid, or other government benefits?
3Should we open an ABLE account in addition to or instead of a special needs trust?
4How should other family members' wills and beneficiary designations be coordinated to protect the beneficiary's benefit eligibility?
5What happens to the remaining trust assets when the beneficiary passes away — is there a Medicaid payback requirement?
6Do we need to pursue guardianship, or are there less restrictive alternatives such as supported decision-making or a limited conservatorship?
7How do you recommend selecting and instructing a trustee to ensure proper administration over the long term?

Understanding Special Needs Planning Legal Costs

Special needs planning costs vary based on the complexity of the situation and the type of trust involved. A straightforward third-party special needs trust typically costs between $2,500 and $5,000 for drafting and execution. First-party special needs trusts, which require additional compliance provisions including Medicaid payback language and potential court approval, generally range from $3,000 to $7,500. Pooled trust enrollment fees are usually lower, often between $500 and $2,000, with ongoing administrative fees charged by the nonprofit trustee. If guardianship or conservatorship proceedings are needed, court filing fees, attorney fees, and hearing costs can add $3,000 to $10,000 or more. ABLE account setup is typically free or low-cost, though ongoing account maintenance fees apply. Many special needs planning attorneys charge flat fees for standard trust packages and hourly rates ($250–$500/hour) for complex matters such as trust litigation, benefit appeals, or multi-state coordination.

Key Legal Terms

Video Resources

These videos are provided for informational purposes only. The attorneys and organizations featured are not affiliated with or endorsed by Northwind Law.

Special Needs Trust Explained

Toby Mathis Esq | Tax Planning & Asset Protection

ABLE Accounts Explained: Tax-Free Savings for Disability

The Medicare Family

What Is a Special Needs Trust?

Policygenius

Frequently Asked Questions About Special Needs Planning

A first-party special needs trust is funded with the disabled beneficiary's own assets — such as a personal injury settlement or inheritance received outright — and must include a Medicaid payback provision requiring reimbursement to the state upon the beneficiary's death. A third-party special needs trust is funded by someone other than the beneficiary, typically a parent or grandparent, and has no Medicaid payback requirement, meaning remaining assets can pass to other family members.

Citations & Sources

[1]
Approximately 42.5 million Americans — 13% of the civilian noninstitutionalized population — have some type of disability, according to the most recent American Community Survey data. — U.S. Census Bureau, American Community Survey 2023
[2]
The SSI program provides monthly cash benefits to approximately 7.4 million aged, blind, and disabled individuals with limited income and resources. — Social Security Administration, SSI Annual Statistical Report 2023
[3]
Federal law under 42 U.S.C. § 1396p(d)(4)(A) authorizes self-settled special needs trusts for disabled individuals under age 65, funded with the individual's own assets, provided the trust includes a Medicaid payback provision. — Social Security Administration, POMS SI 01120.203
[4]
The ABLE Act allows eligible individuals with disabilities to save up to $100,000 in a tax-advantaged account without losing SSI eligibility, with total annual contributions tied to the federal gift tax exclusion. — ABLE National Resource Center
[5]
The annual cost of residential care for individuals with intellectual and developmental disabilities ranges from $60,000 to over $120,000 depending on the level of support required and geographic location. — Genworth Cost of Care Survey 2023

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