The Fundamentals of Special Needs Estate Planning

Disclaimer

Please note that this page is a work in progress, much like the attorney who wrote it.

What is Estate Planning?

Estate Planning enables you to intentionally confront the always uncertain future, smoothing the way forward so that you are prepared for the sharp turns in life that the future inevitably brings to you and to your family. Estate Planning requires looking ahead toward the future, making predictions, and then making choices based on the possibilities you foresee.

The basic tools of Estate Planning are Durable Powers of Attorney, Advance Medical Directives, Last Wills and Testaments, and Trusts.

What is Special Needs Estate Planning?

Life is inherently complicated, even more so for people with disabilities. Special Needs Estate Planning enables you make calculated decisions today that will Shape the Future to benefit the uniquely vulnerable people who you love.

Special Needs Estate Planning uses the same basic tools as traditional Estate Planning tools, but in a way precisely calculated to benefit your vulnerable loved ones while simultaneously protecting their eligibility for needs based governmental benefits, like Medicaid and Supplemental Security Income (SSI).

The Three Pillars of Special Needs Estate Planning

Legal Planning: The legal structures and documents necessary to preserve eligibility and support autonomy.

Financial Planning: Life expectancy, material needs, and ability to earn. This can be like planning for retirement at age 18.

Community Planning: Housing, employment, social and emotional well-being.

Understanding Government Benefit Categories

Means Tested Benefits (Needs Based): Supplemental Security Income (SSI); MediCAID; and MediCAID Waiver Services

Entitlement Benefits (Universal): Social Security; Social Security Disability Insurance (SSDI); Disabled Adult Child Benefits (DAC); MediCARE

Miscellaneous Benefits: Housing Choice Voucher Program (HCV) also known as Section 8 Housing (federally funded); Court-Appointed Criminal Defense Counsel (guaranteed by the 6th and 14th Amendments to the United States Constitution) funded by the prosecuting government); Legal Aid Services (provided by nonprofits, NOT a constitutional right); Veteran Benefits (for those who served on active duty and received an other than dishonorable discharge, and potentially for their surviving spouses, children, and parents)

Legal Definition of Disability

Child Standard: A medically determinable physical or mental impairment or combination of impairments that causes marked and severe functional limitations, and that can be expected to cause death or that has lasted or is expected to last for a continuous period of not less than 12 months. 42 U.S.C. § 1382c(a)(3)(C)

Adult Standard: The inability to engage in Substantial Gainful Activity (SGA) by reason of any medically determinable physical or mental impairment(s) which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months. 42 U.S.C 1382c(a)(3)(A)

Substantial Gainful Activity (2025): $1,620/month (non-blind), $2,700/month (blind)

Supplemental Security Income (SSI)

Needs-based program intended to provide SHELTER to impoverished people (low-income and low-wealth) who are Disabled or age 65+.

Federal Benefit Rate (FBR) = Maximum Monthly SSI Benefit. In 2025 the FBR = $967 per month (or $1,450 for an eligible couple). The FBR is updated annually.

Countable Income Limit = Maximum amount a person can earn in a given month and still qualify for SSI. In determining a beneficiary’s actual SSI benefit, the Social Security Administration (SSA) ignores the first $20 received from any source, as well as the first $65 earned. After that the SSA reduces the benefit received by $1 for every $2 of earned income. Using a little algebra, we determine that the Countable Income Limit = (FBR x 2) + $20 + $65 = $2,019 per month (or $2,985 for an eligible couple) in 2025.

Countable Resource Limit (2025): $2,000 (or $3,000 for an eligible couple). This dollar figure has remained unchanged since 1989, despite 36 years of inflation.
However, the SSA excludes many resources from being counted, regardless of their actual value, including: an individual’s home; one vehicle; household goods; and personal effects.

SSI: Earned Income versus Unearned Income

Note that the SSA’s definition of Income is not exactly the same as the definition used by Internal Revenue Service.

Earned Income: SSI Benefit reduced $1 for every $2 after first $65 earned. This means that an SSI recipient always has a consistent financial incentive to work; you always make more money by working.

Unearned Income: Reduced $1 for every $1 after first $20 received from any source.

Unearned income includes cash gifts and payments from any source. For example, if someone gives money directly to you and you use that money to pay for your rent, then the money you received counts as Unearned Income, and reduces your SSI benefit by one dollar for every dollar you received. Note that this includes cash given directly to you by a Special Needs Trust. Unearned income also includes money received from other government benefits programs like SSDI, DAC, state programs, etc.

SSI: In-Kind Support and Maintenance (ISM)

In-Kind Support and Maintenance (ISM) means unearned income in the form of Shelter or certain specific Shelter Related Expenses that you receive and that is paid for by someone else, e.g. living with a parent without paying rent.

Receiving ISM reduces the SSI Benefit received by up to one third of the Federal Benefit Rate (1/3 of FBR = $322.33 in 2025). If the SSA determines that a recipient is not paying fair market value for Shelter (or specific Shelter Related Expenses) received, then SSA calculates the value received and reduces your SSI benefit by $1 for every $1 of unearned value received, up to a maximum of one third of the FBR.

Losing one third of your SSI benefit might be worth it, if receiving ISM means you get to live in a safer and nicer home than you would otherwise be able to afford.

Note that the SSA only counts Shelter or specific Shelter Related Expenses when determining whether you are receiving In-Kind Support and Maintenance. Those specifically countable Shelter Related Expenses are: Rent, Mortgage, Property Taxes, Heating Fuel, Gas, Electricity, Water, Sewerage, Garbage Collection. The SSA no longer counts the receipt of Food or Clothing as ISM.

Any other kind of Shelter Related Expense that is not on that list is Not Counted when determining ISM. Uncounted Shelter Related Expenses include: Telephone service, Internet Service, Landscaping, Home Repairs, Clothing, Food, etc. Someone can pay for any of these

Practical Application: SSI and Rent

If someone (including a Special Needs Trust) gives you cash, then the SSI benefits you receive will be reduced by one dollar for every dollar you were given.

If someone (including a Special Needs Trust) pays for your Shelter or pays for the specifically counted Shelter Related Expenses, then your SSI benefit will be reduced by one dollar for every dollar of Shelter value you received, up to a maximum reduction of one third of the FBR.

Special Needs Planning Ninja Move: If you use a Special Needs Trust to fund an ABLE Account, and then use that ABLE Account to pay for Rent, that is NOT considered to be In-Kind Support and Maintenance, so there is No SSI benefit reduction.

Social Security Disability Insurance (SSDI) and Disabled Adult Child Benefits (DAC)

Supplemental Security Disability Insurance (SSDI): Based on a disabled individual’s own work record.

Disabled Adult Child Benefits (DAC): Based on a disabled individual’s parent’s work record. Parent must be retired, disabled, or deceased.

DAC eligibility: The disabled individual must be an unmarried adult with a disability that started before age 22.

SSDI/DAC benefits eventually overwrite and replace SSI benefits (as SSDI/DAC are considered to be Unearned Income for the purposes of SSI).

Everyone eligible for Social Security Disability Insurance (SSDI) or Disabled Adult Child (DAC) benefits is also eligible for MediCARE after a 24-month waiting period.

Medicaid and Medicare

Medicaid and Medicare are two separate and distinct federal health benefit programs, which unfortunately have confusingly similar names.

MediCAID: Needs-based benefit program. Medicaid covers Long-Term Care services in nursing facilities, and provides supports for non-medical needs such as assistance with the Activities of Daily Living (ADLs) like mobility, bathing, dressing, eating, and toileting.

Medicaid is a federal program, but it is administered by the states. This means that Medicaid eligibility requirements and Medicaid benefits can both vary significantly from state to state. In Virginia, you must apply separately for Medicaid and SSI; SSI does not automatically qualify you for Medicaid in Virginia, the way it does in some other states.

MediCARE: Entitlement program. Medicare is normally associated with people over age 65, but younger people with disabilities can benefit. Anyone eligible to receive SSDI/DAC benefits becomes eligible to receive Medicare benefits after a 24 month waiting period.

Medicare is a fully federal program, so the benefits do not vary from state to state.

Protecting Medicaid and Medicaid Waiver Services Eligibility

There are Two Key Tools used to protect a disabled individual’s eligibility for 1) Medicaid, 2) Medicaid Waiver Servies, and 3) to a less important degree, Supplemental Security Income (SSI).

1) ABLE Accounts (You do NOT Need a Lawyer!)

2)Special Needs Trusts (SNTs) (Unfortunately, you need a lawyer.)

ABLE Accounts

ABLE (Achieving a Better Life Experience) Accounts are tax-advantaged savings accounts for individuals with disabilities. The money contained within an ABLE Account is Not considered to be a Countable Resource for the purpose of determinizing eligibility for SSI, Medicaid, etc.

The money within an ABLE Account must only be spent on Qualified Disability Expenses (QDEs) but those are defined very broadly by the Internal Revenue Service as something that helps the person stay healthy, independent, and have a good quality of life. QDEs include money spent on basic living expenses, food, housing, rent, mortgage, utilities, property taxes, education, training, transportation, and funeral/burial expenses.

To qualify for an able account, a disabled individual must have a disability that began prior to age 26 (although that age limit is scheduled to increase to age 46 on January 1, 2026.) Even families with young children who are disabled can benefit from having an ABLE Account; it can be used to pay for medical copayments or out of network therapies.

2025 Annual Contribution Limit: $19,000 plus up to $15,060 more from beneficiary’s earnings if not in retirement plan.

Up to $100,000 exempt from SSI Countable Resource Limit.

ABLE Accounts are owned by the person with the disability, but can be managed by a Parent, Guardian, or Agent with a Power of Attorney

Medicaid Payback Requirement!

Virginia’s ABLE program is called ABLEnow

Special Needs Trusts (SNTs)

A Trust is essentially a bucket of money that is attached to rules about how that money may be spent. The person who makes the bucket and writes the rules is the Grantor. The Grantor hands the bucket to a Trustee, who is obligated to follow the rules. The rules require the Trustee to spend the money for the benefit of the Beneficiary.

In a properly constructed Special Needs Trust (SNT), the Beneficiary does not have access to or control of the money, so the trust fund is Not considered to be a Countable Resource for the purpose of determining eligibility for governmental benefits. It’s critical to use a knowledgeable attorney to create your SNT.

First-Party SNT: Funded only with the disabled individual’s own money (inheritance, lawsuit). Medicaid Payback applies!

Third-Party SNT: Funded only by parents or others; not with the disabled individual’s own money. No Medicaid Payback.

Pooled SNTs: Composed of many different SNTs each of which has their own account within the Pooled Trust. Run by nonprofit organizations, who leverage the larger pool of funds in an attempt to gain greater returns on investments. Pooled SNTs are allowed to contain both First-Party SNTs and Third-Party SNTs. Pooled SNTs may be best for relatively small trusts.

There are two prominent Pooled SNT options in Virginia: Commonwealth Community Trust and The Arc of Northern Virginia Trust.

Legal Capacity and Decision Making

At age 18, a person becomes a legal adult. Parents lose default authority to make decisions.

If the adult has the legal capacity (and the willingness) they can sign Power Of Attorney (POA) or Supported Decision-Making agreement.

Supported Decision Making

Supported Decision Making allows disabled individuals to retain authority with help from supporters.

Recognized as less restrictive alternative to guardianship under Virginia law.

Courts must consider SDM before granting guardianship.

Guardianship and Conservatorship

If the adult does not have the legal capacity to sign a Power Of Attorney: parents may petition a Circuit Court for Guardianship (personal decisions) and/or Conservatorship (financial decisions).

Need to start the process around age 17 in order to complete the court process by 18.

Court may preserve specific rights like voting.

Limited guardianship is possible. Less restrictive options must be considered first.

Civic Responsibilities of Adulthood

Adults are Legally Responsible for their own actions.

Voting rights activate at 18 years old! The United States Constitution protects the rights of citizens to vote. Exercising your right to vote is absolutely necessary in order to protect the rights of people with disabilities.

Even though there is currently no military draft in the United States, all males must register with the Selective Service System at age 18. There is no exception for any kind of disability. The legal obligation is determined by “sex assigned at birth”.

Privacy and Legal Independence

Parents lose access to school, medical, and financial records without consent.

An Adult student controls who may access their own educational records.

Additional Resources

Federal Benefit Finder Tool: Find government benefits and financial help

5 Things to Know When Your Child with Disabilities Turns 18 – Social Security Matters

Disability Law Center of Virginia

Exceptional Lives

Department of Medical Assistance Services (DMAS) Virginia’s Medicaid Program

Cover Virginia

Think College

Virginia Department for Aging and Rehabilitative Services (DARS)

The Arc of Virginia

True Link Prepaid Visa Card (works well with SNTs)

James D. Beard
JD Beard Law PLLC
435 Merchant Walk Square, Suite 300-77
Charlottesville, VA 22902-6514
Phone: 434-218-5364
Email: [email protected]