ADVERTISING: ADVERTORIAL – Leaving money to a loved one with a disability? Do it wrong and you could hurt them

One of the hardest conversations I have as an Idaho estate planning attorney is with parents or grandparents who have already done something that seemed loving — they left money directly to a child or grandchild with a disability. They meant to help. Instead, they inadvertently cut off that person’s Medicaid coverage and Supplemental Security Income (SSI) benefits.
Here’s what you need to know before you make the same mistake.
The Problem with Leaving Money Directly
Federal programs like Medicaid and SSI provide critical health care, housing assistance, and daily living support for people with disabilities. But they come with strict asset limits — typically $2,000 or less in countable resources for an individual.
When a person with a disability receives an inheritance, a life insurance payout, or even a gift above that threshold, they may lose their eligibility for these programs until the money is spent down. That means the funds you set aside to help them might simply replace the government support they were already receiving — dollar for dollar — until it’s gone.
In Idaho, where long-term Medicaid services and SSI benefits can be a lifeline for people with significant disabilities, this is not a hypothetical risk. It happens regularly, and it’s entirely preventable.
The Solution: A Special Needs Trust
A Special Needs Trust (SNT) — sometimes called a Supplemental Needs Trust — is a legal tool specifically designed to hold assets for a person with a disability without disqualifying them from means-tested government benefits.
The key is in the structure. The trust owns the assets, not the beneficiary. Because the beneficiary doesn’t have direct control or access to the funds, the government generally does not count the trust assets when determining eligibility.
The trust can then pay for things that supplement what government programs cover — things like:
• Specialized medical equipment or therapies not covered by Medicaid
• Educational programs or vocational training
• Entertainment, travel, and recreation
• Technology such as computers or communication devices
• Personal care attendants beyond what Medicaid provides
What SNTs typically cannot pay for are items that would directly substitute for government support — cash payments to the beneficiary, rent in certain circumstances, or food — without triggering a reduction in benefits. A well-drafted trust and an informed trustee make all the difference.
Two Types You Should Know About
Third-Party SNTs are created by someone other than the beneficiary — a parent, grandparent, or other relative — using their own funds. These are the most common and the most flexible. When the beneficiary dies, any remaining assets can pass to other family members. There is no government payback requirement.
First-Party SNTs (also called self-settled or d(4)(A) trusts) are funded with the disabled person’s own assets — often from a personal injury settlement or inheritance received without a trust in place. These require a Medicaid payback provision, meaning the state must be reimbursed from remaining funds after the beneficiary’s death.
Don’t Forget Your Beneficiary Designations
A common oversight: a parent has a beautifully drafted SNT in their estate plan, but their IRA still names their disabled child directly as beneficiary. At death, that retirement account bypasses the trust entirely and goes straight to the child — triggering exactly the benefit loss the family tried to avoid. Your trust, your will, your life insurance, and your beneficiary designations all need to work together.
What to Do Next
If you have a family member with a disability — a child, grandchild, sibling, or spouse — review your estate plan with an attorney experienced in special needs planning. Idaho families can plan in ways that will both protect the benefits their loved ones are entitled to and give them a gift that lets them share in your legacy.
My law firm is currently offering free telephonic, electronic, or in-person consultations concerning special needs trusts, adult guardianships, probates, and creating or reviewing estate planning documents.
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Robert J. Green is an Elder Law, Trust, Estate, & Guardianship Attorney and the owner of Kootenai Law Group, PLLC in Coeur d’Alene. If you have questions about estate planning, probates, wills, trusts, powers of attorney, guardianships, Medicaid planning, or VA Benefit planning, contact Kootenai Law at 208-765-6555, [email protected], or visit www.KootenaiLaw.com.
This has been presented as general information and not as legal advice. Do not engage in legal decision-making without the advice of a competent attorney after discussion of your specific circumstances.