When you want to provide for a loved one with special needs in your estate plan, your intentions are good. Yet, those same gifts can create real problems if you do not plan carefully.
Special needs planning gives you a way to offer lasting support without disrupting the vital benefits that your loved one relies on.
Eligibility Rules Create Planning Challenges
Public programs such as Supplemental Security Income (SSI) and Medi-Cal provide a foundation for many people with disabilities. But starting in 2026, Medi-Cal benefits will be subject to an asset limit.
An inheritance can change the beneficiary’s financial profile considerably. The outcome is often a loss of benefits, sometimes for months or years, while the family struggles to correct the mistake.
Special Needs Trust: The Cornerstone Tool
A special needs trust (SNT) is the main planning vehicle that prevents this outcome. You create the trust, appoint a trustee, and direct assets into it instead of leaving them outright to the beneficiary. The trustee manages distributions in a way that supplements government benefits.
Trust funds can pay for education, specialized therapies, recreation, travel, and even transportation. Because the assets are held in trust, they do not count toward the program’s resource limits.
First-Party vs. Third-Party Trust
Medi-Cal is required to seek reimbursement from the estates of deceased beneficiaries. A special needs trust can be created with assets that are the property of the beneficiary, and the benefits would stay intact.
However, assets that remain in the trust could be attached when Medi-Cal is seeking reimbursement. This is why you would not want to leave a direct inheritance to a benefit recipient, even though they can use a bequest to create a trust.
On the other hand, if you use your own assets to fund the trust, this would be a third-party trust. After the beneficiary’s death, Medi-Cal would not be able to reach the remainder. Anything left in the trust would go to a successor beneficiary that you name when you create the trust.
ABLE Accounts
California also participates in the ABLE program, which is called CalABLE in our state. It allows a person with disabilities to hold assets in their own name without disqualifying them from benefits, provided annual and lifetime contribution limits are respected.
Funds from an ABLE account can cover housing, transportation, education, and daily living expenses. The annual contribution cap is tied to the federal gift tax exclusion, which is $19,000 in 2025.
While the account balances are smaller than what a trust can hold, ABLE accounts are flexible and easy to use. Many families find that a trust and an ABLE account together create the right mix of security and convenience.
Choosing a Trustee
The trustee you name will play a central role. They must understand not only the financial side of the job but also the regulatory restrictions that apply to distributions.
A family member may know the beneficiary’s needs best but may lack technical expertise. On the other side of the coin, a professional fiduciary or corporate trustee brings knowledge and neutrality but may not have the same personal connection.
The decision depends on the complexity of assets, the size of the trust, and the availability of reliable family members. In many cases, families use a professional trustee and then appoint a relative as a trust protector or advisor who provides insight into the beneficiary’s daily life.
Providing Care Guidance Beyond Finances
Money is only one part of the equation. A Letter of Intent, sometimes called a care profile, gives the trustee and future caregivers personal details about your loved one’s routines, therapies, and preferences. It is not legally binding, but it fills in the human side of the plan.
This document can describe medication schedules, daily activities, medical providers, favorite foods, and social interactions. When used with the legal framework of a trust, it gives a new caregiver the knowledge they need to continue providing consistent support.
Targeted Solutions for Specific Circumstances
The fact that tools like SNTs and ABLE accounts exist shows how estate planning can address highly specific needs. There is no need to rely on one document to provide for everyone if that arrangement is less than ideal.
Simply put, estate planning is not one-size-fits-all. Your plan can and should be adapted to suit your specific needs, and this is why personalized legal guidance is key.
We Are Here to Help!
When you work with our firm, we will learn about your situation and your objectives. Once we understand your position, we will make recommendations based on the circumstances.
After you decide exactly how to proceed, we will help you establish a plan that brings your legacy vision to life when the time comes.
To set the wheels in motion, call our Brentwood, CA estate planning office at 925-516-4888. If you would rather send us a message, use our contact form, and we will get back in touch with you as soon as possible.
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