Details Matter When Planning for Special Needs Family Members- Families with a disabled person who receives government benefits, including Medicaid and Supplemental Security Income (SSI), need to take extra care so those benefits aren't lost if the person receives an inheritance or proceeds from a lawsuit. A recent article, "Special Needs, Special Plans," from the Michigan Chronicle provides details on what family members need to know about their loved ones.
SSI is for food, shelter and clothing. Medicaid benefits cover medical and dental care. These benefits can be protected through a Special Needs Trust (SNT), which allows funds to be used for supplemental needs.
Supplemental needs are things not covered by government benefits but that are essential to improving a person's quality of life. This includes medical and dental care beyond what Medicaid provides because there's more to life than basic medical care. SNT funds can be used to pay for recreation and travel, entertainment, therapies, specialized equipment, assistive technology, education and transportation, among other expenses.
For parents, setting up an SNT is essential to ensure their disabled child has a better quality of life after the parents are deceased.
As an example, consider Nancy, who is 43 years old and lives with a son, Jeff, who was diagnosed with Asperger's Syndrome as a child. Jeff's father (Nancy's husband) passed away many years ago. Jeff is 20 years old. Nancy makes sure Jeff receives behavior therapy and family therapy and takes an art class at a community college that can accommodate his special needs. They take a trip at least twice a year to a lake or ocean-side community because Jeff loves being near the water.
Jeff receives Medicaid benefits. However, Nancy pays for his behavior therapy herself, as Medicaid does not cover it. She sees a significant difference in his behavior and makes the necessary sacrifices for him. One day, Nancy is diagnosed with a terminal disease. She isn't wealthy, but she does own a home, has a 401(k) and a life insurance policy with a $100,000 death benefit.
Nancy talks with her sister about caring for Jeff after she is gone. She neglects to update the beneficiary on her life insurance policy, which still lists her late husband as the beneficiary. Instead of meeting with an estate planning attorney, she hears from a friend that she can add Jeff to the house's title so he will have a place to live after she has died.
When Nancy passes away, her sister discovers how poorly Nancy had prepared, even knowing her death was near. Bank accounts were in Nancy's name only, so the sister must go to court to access any funds for Jeff. This is the simplest problem. Because beneficiary designations were not updated, Jeff will inherit the 401(k) and the life insurance policy. He will also inherit cash in bank accounts and now owns a home.
Jeff will be disqualified from receiving Medicaid benefits and will lose all his medical and dental coverage. The sister will have to petition the court for a conservatorship, which will grant legal authority to make financial decisions for Jeff. Once the conservatorship is in place, the sister will need to return to court to create a Special Needs Trust. All assets left for Jeff will need to be placed in the SNT. This will become a long, expensive and stressful experience. However, it must be done to protect Jeff. He is only 20, and the long-term cost of his healthcare without government benefits will quickly exhaust his inheritance.
If Nancy had consulted with an experienced estate planning attorney soon after her diagnosis, everything could have been prepared and executed so her son would be protected.
Don't delay planning, even with good health. Speak with an estate planning attorney to start planning for your future and your loved ones.
Schedule your phone consultation: THE LAW OFFICES OF CLAUDE S. SMITH, III
Details Matter When Planning for Special Needs Family Members
Reference: Michigan Chronicle (Oct. 14, 2025) "Special Needs, Special Plans"
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