You want your child to be taken care of. If you are creating a will, leaving your child an inheritance may seem like the obvious choice.
But if your child receives needs-based government benefits, an inheritance can create an unexpected problem.
The issue is not whether your child should receive your money. The issue is how the inheritance is structured.
An Inheritance Can Affect Benefits
Programs such as Supplemental Security Income, or SSI, have financial eligibility rules. The Social Security Administration recognizes specific types of trusts that can be used in planning for individuals with disabilities.
Imagine a parent leaves an adult child $100,000 directly through a will.
That money becomes the child’s asset. Depending on the child’s benefits and circumstances, the inheritance could affect eligibility.
The parent’s intention was to provide financial support. The structure of the inheritance may instead create a benefits problem.
A Special Needs Trust May Be an Alternative
A special needs trust can allow assets to be held and managed for a person with a disability while addressing certain public-benefit considerations.
A third-party special needs trust is commonly used when parents, grandparents, or other relatives want to provide financial support without simply giving the assets directly to the beneficiary.
The trust can potentially pay for expenses that improve the beneficiary’s life while preserving eligibility for certain benefits, depending on the trust and the applicable program rules.
The details matter. A special needs trust is not simply a standard trust with a different name.
Do Not Forget Beneficiary Designations
Even a well-designed trust can be undermined by an outdated beneficiary designation.
For example, a parent may create a special needs trust but name the child directly on a life insurance policy or retirement account.
The trust exists, but the money may never reach it.
That is why estate planning requires coordination between your legal documents, asset ownership, and beneficiary designations.
What About ABLE Accounts?
ABLE accounts are another tool that may be useful for eligible individuals with disabilities. Current Social Security guidance states that ABLE eligibility expanded in 2026 to individuals whose qualifying disability began before age 46.
An ABLE account and a special needs trust are not interchangeable. Depending on the family’s circumstances, they may serve different purposes and may even be used together.
Parents should also talk with grandparents and other relatives. A well-intentioned grandparent who leaves money directly to a child may unintentionally create the same benefits problem the parents were trying to avoid.
Plan Before the Inheritance Exists
If your child receives SSI, Medicaid, or other needs-based benefits, ask these questions before creating or updating your estate plan:
Who should manage money for my child? What happens if my child receives an inheritance unexpectedly? Who should serve as trustee? How should grandparents provide financial support? Would an ABLE account or special needs trust be appropriate?
These decisions are easier to address while you are alive and able to coordinate the plan.
The Autonomy Group, PC works with families throughout North Carolina and South Carolina on special needs planning, trusts, estate planning, and related benefit considerations.
If you are planning an inheritance for a child or family member with a disability, the way the money is received can be just as important as the amount being left behind.
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