Every parent wants to leave something behind for their child. A sense of security. A financial cushion. A way to say, “You'll be okay, even when I'm not here.”

For families with a loved one who has special needs, that intention comes with an added layer of complexity.

At The Law Office of Susan A. Katzen, this is one of the most common and important concerns families bring forward. What many people do not realize is that leaving money directly to someone who receives benefits like SSI or Medicaid can unintentionally cause them to lose those benefits.

So the real question becomes this: how do you help without creating risk?

Understanding the answer can make all the difference.

Why This Matters More Than Most Families Realize

This issue is more common than many people think. Millions of individuals rely on needs-based benefits to maintain stability in their daily lives.

Programs like Supplemental Security Income and Medicaid are designed to support individuals with limited financial resources, which is why they come with strict asset limits. In many cases, an individual receiving SSI cannot have more than $2,000 in countable assets.

That means even a relatively small inheritance can disrupt eligibility.

What was meant to provide comfort and support can instead create uncertainty around:

• Healthcare
  
  

• Housing
  
  

• Monthly income
  
  

When families understand this risk ahead of time, they are in a much better position to avoid it.

Understanding How Benefits Are Affected

To understand how to protect benefits, it helps to understand how they work.

SSI is a needs-based program. Eligibility depends on both income and assets. Medicaid often follows similar financial guidelines.

SSDI is different. It is based on work history and does not have the same asset restrictions. This is where confusion often begins.

When someone on SSI receives an inheritance:

• It is typically treated as income in the month it is received
  
  

• Any remaining amount becomes a resource the following month
  
  

• If resources exceed the limit, benefits can be reduced or lost
  
  

In simple terms, ownership matters.

If your loved one owns the asset outright, it can affect their eligibility.

The Problem Most Families Don't See Coming

This is where many families run into trouble.

Imagine a parent who leaves $50,000 directly to their adult child. The intention is to provide financial security.

Instead, the result may be:

• Loss of SSI payments
  
  

• Disruption of Medicaid coverage
  
  

• Immediate financial and legal stress
  
  

The problem is not the inheritance itself.

It is how the inheritance is received.

The Right Solution: A Special Needs Trust

Fortunately, there is a well-established solution.

A special needs trust allows you to leave assets for a loved one without giving them direct ownership. Because the individual does not own the funds, those assets are not counted the same way for SSI and Medicaid purposes.

This type of trust is designed to supplement benefits, not replace them.

It can be used to pay for things that improve quality of life, such as:

• Personal care and services
  
  

• Education and training
  
  

• Travel and experiences
  
  

• Additional support not covered by government benefits
  
  

With the right structure, your loved one can benefit from the inheritance without losing essential support.

Choosing the Right Type of Trust

Not all special needs trusts are the same, and choosing the right one matters.

A third-party special needs trust is funded with assets that belong to someone else, typically a parent or grandparent. This is the preferred option for estate planning.

It allows you to:

• Leave an inheritance without affecting benefits
  
  

• Avoid Medicaid repayment requirements after the beneficiary's lifetime
  
  

• Maintain greater flexibility and control
  
  

A first-party special needs trust is different. It is funded with assets that already belong to the individual with special needs.

This often happens when planning was not done in advance.

While it can still preserve benefits, it usually comes with stricter rules, including a Medicaid payback provision.

This is why planning early makes such a difference.

What Happens If Planning Is Delayed

If planning happens late, there may still be options, but they are more limited.

One example is a pooled trust, which is managed by a nonprofit organization. The beneficiary's funds are placed into an individual account within a larger trust structure.

While this can help maintain eligibility, it often involves:

• Less control
  
  

• More restrictions
  
  

• Administrative limitations
  
  

Planning ahead gives you more flexibility and better outcomes.

Why Proper Administration Matters

Even with the right trust in place, how it is used matters.

Certain payments, especially those related to housing or food, can affect SSI benefits if handled incorrectly.

For example, if a trust pays rent directly, it may reduce the beneficiary's SSI payment.

This does not mean the trust is ineffective. It means the plan needs to be managed carefully.

A strong plan includes:

• The right legal structure
  
  

• Clear instructions for use
  
  

• Ongoing guidance when needed
  
  

Where ABLE Accounts Fit In

Another tool families often consider is an ABLE account.

These accounts allow individuals with disabilities to save money without immediately affecting SSI eligibility, up to certain limits.

They can be helpful for:

• Managing smaller amounts of money
  
  

• Covering everyday expenses
  
  

• Providing financial flexibility
  
  

However, ABLE accounts are typically best used alongside a special needs trust, not as a replacement.

For larger inheritances or long-term planning, a trust provides more protection and flexibility.

Common Mistakes That Can Be Avoided

With the right guidance, many common mistakes can be prevented.

These include:

• Leaving assets directly to the individual
  
  

• Naming them outright as a beneficiary on life insurance or retirement accounts
  
  

• Assuming all disability benefits follow the same rules
  
  

• Failing to coordinate with extended family members
  
  

• Relying on informal arrangements instead of structured planning
  
  

Each of these situations comes from a place of care. But without proper planning, they can lead to unintended consequences.

Planning Is About More Than Money

At its core, this type of planning is about more than finances.

It is about protecting stability, dignity, and quality of life for someone you love.

At The Law Office of Susan A. Katzen, the focus is on helping families create plans that truly work in real life. Plans that protect benefits while still providing meaningful support.

Leaving an inheritance should provide security, not create new obstacles.

With the right approach, it is absolutely possible to do both.

If you are not completely confident that your plan would hold up under real-life circumstances, now is the time to address it by requesting a consultation.