Creating an Estate Plan for a Relative Who Has a Disability

Planning for a loved one with a disability requires thought and care. It’s not just about financial support—it’s about ensuring their needs are met in a way that protects their well-being and independence. Many families worry about balancing providing for their relatives while preserving access to government benefits. By creating the right plan, you can offer your loved one security and peace of mind, even in your absence.

Understanding the Basics of Estate Planning for Individuals With Disabilities

When creating an estate plan for a loved one with a disability, it’s important to understand how inheritances and gifts might affect their eligibility for government assistance programs like Supplemental Security Income (SSI) and Medicaid. These programs often have strict income and asset limits. A direct inheritance could unintentionally disqualify your relative from receiving vital benefits, leaving them without the necessary support.  

An estate plan tailored to their needs helps avoid this issue by preserving access to benefits while providing supplemental resources for expenses not covered by government aid. This may include medical costs, education, or recreational activities. Careful planning ensures your loved one’s financial security while respecting their independence and maintaining the support they depend on for their quality of life. 

The Role of Special Needs Trusts in Estate Planning

Special Needs Trusts (SNTs) are one of the most effective tools for supporting a loved one with a disability while maintaining their eligibility for government benefits. These trusts hold assets for the benefit of an individual with a disability, ensuring the funds are used to enhance their quality of life without impacting programs like SSI or Medicaid.  

SNTs can cover expenses that government benefits don’t, such as education, transportation, specialized therapies, and recreational activities. There are two main types of SNTs:  

  • First-Party SNTs:
    • Funded with the individual’s own assets, such as a personal injury settlement or inheritance.  
    • Requires a Medicaid payback provision, meaning any remaining funds after the individual’s death are used to reimburse Medicaid for benefits received.  
  • Third-Party SNTs:
    • Funded by family members or others, typically through gifts or inheritance.  
    • Does not require Medicaid reimbursement, allowing leftover funds to pass to other beneficiaries.  

Incorporating an ABLE Account Into the Estate Plan

An ABLE account is a valuable addition to an estate plan for a loved one with a disability. These accounts allow individuals with disabilities to save money for qualified expenses without jeopardizing eligibility for government benefits like Medicaid and SSI. Contributions to an ABLE account grow tax-free, and funds can be used for essential needs such as housing, education, transportation, healthcare, and more.  

ABLE accounts work well alongside other planning tools, like Special Needs Trusts. While ABLE accounts have annual contribution limits, they offer flexibility for covering day-to-day expenses, making them a practical option for smaller, ongoing costs. By combining an ABLE account with a comprehensive estate plan, you can ensure your loved one has the resources they need for a comfortable and secure future. 

Guardianship and Powers of Attorney: Planning for Personal Decision-Making

Planning for a loved one’s personal and financial decisions is critical to supporting their long-term well-being. In California, guardianship and powers of attorney offer ways to ensure trusted individuals can step in to help when necessary. Guardianship provides legal authority to make decisions for someone unable to manage their own affairs, particularly in cases involving minors or adults with significant disabilities.  

A durable power of attorney, on the other hand, allows your loved one to appoint someone they trust to handle specific financial or healthcare decisions if they become incapacitated. Unlike guardianship, this tool is less restrictive and helps maintain their independence. Choosing the right decision-makers requires careful consideration, ensuring they understand and respect your loved one’s unique needs, values, and preferences.

How We Can Help You Create a Comprehensive Plan

At OC Wills & Trust Attorneys, we understand the challenges of planning for a loved one with a disability. Our team will work with you to design a plan to meet your relative’s needs while preserving their eligibility for vital benefits. Whether it’s setting up a Special Needs Trust, incorporating an ABLE account, or addressing guardianship decisions, we can guide you through the process. 

Contact Our Experienced Orange County Disability Planning Attorneys

Taking steps to plan for a loved one with a disability is a meaningful way to secure their future. With the right tools and strategies, you can provide the support they need while preserving their independence. Don’t leave these important decisions to chance—contact OC Wills & Trust Attorneys today to schedule a consultation. Together, we’ll create a personalized plan that protects your loved one and offers you peace of mind. 

Brian Chew, the managing partner of OC Wills & Trust Attorneys, has extensive experience in the areas of estate planning, asset protection planning, business succession planning, long-term care planning, and veterans’ benefits. By devoting his practice to estate planning matters, he has founded a firm that strives to provide exceptional service to their clients by working closely with individuals and their families to create comprehensive and customized estate plans. For the past twenty five years, Brian has served thousands of clients in the matters of estate planning, wills and trusts. If you have any questions about this article, you can reach Brian Chew here.