Estate planning for children with special needs requires careful consideration. If you’re a parent of a child with a disability, there are a number of tools you can use to provide for them in accordance with your wishes. While the unexpected can happen at any time, it’s important not to delay having a plan in place as soon as possible. Planning ahead can allow you to protect your child’s eligibility for government benefits, appoint a trusted person as guardian, and ensure they have the long-term care they need.

Establishing a Special Needs Trust

A special needs trust holds assets for the benefit of a person with a disability without jeopardizing their government benefits, such as Medicaid and Supplemental Security Income. These types of trusts allow the beneficiary to have access to funds for expenses that are not covered by public assistance. For instance, the funds can be used for education, recreation, travel, medical care not covered by Medicaid, and other things that can help enhance the beneficiary’s quality of life.

There are several types of special needs trusts to consider when it comes to estate planning for children with special needs, including the following:

• First-party special needs trust: A first-party special needs trust is funded with the assets of the person who has the disability. For example, it may be created with an inheritance or personal injury settlement. With this type of trust, any assets that remain after the beneficiary’s passing must be used to pay back Medicaid for the medical care they received.
• Third-party special needs trust: A third-party special needs trust is funded by a third-party, such as a parent or grandparent. In contrast with a first-party trust, the assets that remain after the beneficiary’s passing can be distributed to other beneficiaries, per the grantor’s wishes.
• Pooled special needs trusts: A pooled special needs trust is managed by a non-profit and pools the funds of many beneficiaries together. However, each beneficiary maintains their own separate account with their assets. Because of the reduced administration fees, pooled trusts are often more cost-effective than an individual trust. They can also lead to greater investment opportunities.

To select the type of special needs trust that is best for your situation, you should first consider the source of the assets that will fund the trust. Once this has been determined, the type of assets, the amount of assets, and your family’s preferences come into play. A knowledgeable estate planning attorney can help you weigh the pros and cons of each type of trust, and assist you with selecting the option that is best for your loved one.

Setting Up an ABLE Account

An Achieving a Better Life Experience (ABLE) account can be a crucial component of estate planning for children with special needs. This is a type of 529 account that allows you to invest money to support your loved one without impacting their ability to receive government benefits. Specifically, these accounts can hold up to $100,000 and have a $19,000 contribution cap for 2025. While the assets in the account grow tax-free, they can be used to pay for things that government benefits do not provide. Once the beneficiary of the account passes away, any funds that remain in the account must be used to reimburse Medicaid.

Implementing a Guardianship

A guardianship can ensure your loved one’s needs will be met if they are unable to care for themselves due to their disability. You can designate a guardian for a minor child who will be responsible for your child’s wellbeing in the event of your own death or incapacity. If you fail to name a guardian and the unexpected occurs, the court will determine who would serve in the role.

For adults, a court-appointed guardian is typically considered the last resort since these arrangements can significantly restrict an individual’s civil liberties. To establish a guardianship, a judge would first determine whether the person subject to the guardianship is legally incapacitated. Next, a court would consider whether there are less restrictive means available, such as a power of attorney. Similarly, a conservatorship can be established if your loved one is unable to manage their financial affairs due to incapacity.

Using a Power of Attorney

After the age of 18, a person with special needs who is not legally incapacitated can sign a power of attorney. This can allow them to designate a trusted agent to make decisions on their behalf in the event they cannot do so themselves. A financial power of attorney can be used to name a person who will manage government benefits, pay for day-to-day needs, and handle legal affairs. A healthcare power of attorney can give the agent the authority to make decisions regarding medical treatment in the event incapacity arises and they cannot express their wishes.

Contact an Experienced Ohio Estate Planning Attorney

The process of estate planning for children with special needs can be complex. It’s critical to have the guidance of an experienced attorney who can help you create a comprehensive plan tailored to your loved one’s needs. Offering trusted counsel and skillful representation for more than 100 years, we work with clients for a wide range of estate planning matters. Contact Middleton Law Offices today at 419.548.0196 for a consultation to learn how we can help.

Articles appearing in this column are intended to provide broad, general information about the law. This article is not intended to be legal advice. Before applying this information to a specific legal problem, readers are urged to seek advice from a licensed attorney.