Estate planning is a crucial process for anyone looking to protect their family and assets, but for families with a loved one who has special needs, it requires additional considerations. Without proper planning, a well-intentioned inheritance can inadvertently jeopardize government benefits and create unnecessary financial hardship.
Annual Cost of Caring
The annual cost of caring for a person with severe special needs can vary widely based on factors such as the level of care required, geographic location and available support services. However, here are some estimated costs in the U.S.:
General Estimates
- Home Care (with full-time caregiver): $50,000 – $150,000+
- Residential Facility (Group Home, Assisted Living): $80,000 – $200,000+
- Medical and Therapy Services (OT, PT, Speech, etc.): $5,000 – $50,000+
- Specialized Equipment and Assistive Technology: $2,000 – $30,000+
- Medications and Medical Expenses: $5,000 – $30,000+
- Education and Special Programs: $10,000 – $50,000+
Total Estimated Annual Costs:
- At-home care: $60,000 – $200,000+
- Facility-based care: $80,000 – $250,000
Even for a very wealthy family, these costs can become prohibitively expensive. The costs can be offset by government assistance, so it is especially important to carefully create a thoughtful estate plan.
The Importance of Special Needs Trusts
One of the most important tools in special needs estate planning is a Special Needs Trust (SNT). This trust allows individuals to leave assets for the benefit of a special needs family member without affecting their eligibility for government benefits such as Medicaid and Supplemental Security Income (SSI).
Income Limits to Maintain Federal Benefits
As of 2025, the income limits for SSI are as follows:
- Earned Income: Individuals must have earned less than $1,550 from work per month in the month they’re applying
- Substantial Gainful Activity (SGA): If you are working in 2025 and your earnings average more than $1,620 ($2,700 if you’re blind) a month, you generally cannot be considered to have a disability.
Asset Limits to Maintain Federal Benefits
The asset limits for SSI eligibility are:
- Individual: $2,000 in countable resources
- Couple: $3,000 in countable resources.
Certain assets are excluded from these limits, such as the person’s homestead (if any), one vehicle per household and most personal belongings and household goods.
It’s important to note that these thresholds are subject to change based on federal regulations and cost-of-living adjustments.
Therefore, even a very modest inheritance, can affect the continuance of benefits due to the low thresholds of allowable income and asset limits
For example, suppose Jean wants to leave $200,000 to her son, George, who has a developmental disability. If she leaves the money directly to George in her will, he may become ineligible for Medicaid and SSI because his assets exceed the eligibility threshold. However, by placing the money in a properly structured Special Needs Trust, Jean can ensure that George continues receiving public assistance while also benefiting from the funds for supplementary needs such as education, therapy, and recreation.
Types of Special Needs Trusts
There are two primary types of SNTs:
- First-Party Special Needs Trust – Funded with assets belonging to the individual with special needs, such as an inheritance or lawsuit settlement. This type of trust must include a Medicaid payback provision upon the beneficiary’s passing.
- Third-Party Special Needs Trust – Funded with assets belonging to someone other than the individual with special needs, such as parents or grandparents. These trusts do not require a Medicaid payback provision and allow for greater flexibility in estate planning.
Power of Attorney, Guardianship, and Decision-Making
If your loved one is unable to make legal or financial decisions on their own, it is important to establish legal guardianship or powers of attorney. If the individual has capacity, a durable power of attorney for finances and a healthcare power of attorney can help ensure that someone trusted is making decisions in their best interest. If your loved one does not have capacity, a guardian must be appointed by the court for financial and healthcare decisions.
Common Mistakes in Special Needs Estate Planning
- Leaving assets outright to the individual – As mentioned, this can disqualify them from crucial government benefits.
- Naming the individual as a direct beneficiary – Life insurance policies, retirement accounts and other financial assets should designate the Special Needs Trust as the beneficiary rather than the individual.
- Failing to fund the trust properly – An unfunded trust serves no purpose. Assets must be properly allocated to support the individual over their lifetime.
The Consequences of Failing to Plan
Without a well-structured special needs estate plan, the individual may face serious financial and legal difficulties. They could lose their government benefits, lack proper care management, or face costly court proceedings to establish guardianship after parents or caregivers pass away.
For instance, consider Mike and Ellen, who have a daughter named Laura with autism. They intended to leave their assets to Laura but never created an estate plan. When they both passed away suddenly, Laura inherited a lump sum, making her ineligible for Medicaid. Her siblings were forced into an expensive legal battle to create a trust retroactively, and in the process, significant funds were lost to legal fees and taxes. Had they planned ahead, a properly established Special Needs Trust could have avoided these complications.
Conclusion
Special needs estate planning is essential for securing the long-term well-being of a loved one with disabilities. By utilizing tools like Special Needs Trusts, guardianship arrangements and thoughtful beneficiary designations, families can ensure their loved one’s financial security without compromising government benefits. Planning ahead will allow peace for your family members in the future.
Next Steps
With offices in Cleveland and Columbus, KJK’s estate planning attorneys are dedicated to providing comprehensive guidance tailored to your unique needs. To learn more or schedule a consultation, please contact an attorney in our Estate Planning practice group:
- Cleveland Office: 216.696.8700
- Columbus Office: 614.427.5731
We look forward to assisting you with securing your future.