Planning for a Loved One with Special Needs: Financial Security and Quality of Life

By Rachael Pierce, Esq.
Assistant Vice President and Trust Officer

If you have a loved one with special needs, your care and advocacy have likely shaped every part of their daily lives. You have been their voice in navigating education and support systems, their advocate in medical settings, and their source of comfort and stability. But what will happen when you are no longer able to fulfill that role?

Continuing your legacy of care means protecting both your loved one’s financial security and their quality of life. 

Protecting Financial Security with a Special Needs Trust

Leaving money outright to a person with special needs may seem a straightforward option, but it can jeopardize eligibility for essential benefits such as Supplemental Security Income (SSI) and Medicaid, which have strict income and asset limits. Leaving funds to someone else (often a sibling) can complicate relationships with the very person best positioned to be an ally and advocate. And circumstances in that person’s life such as divorce or incapacity may interfere with their ability to allocate funds to providing care.

That is where a special needs trust comes in. There are three primary types:

• First-Party Special Needs Trust – Funded with the beneficiary’s own assets, often from a legal settlement or inheritance.
• Third-Party Special Needs Trust – Funded by someone other than the beneficiary, such as a parent, grandparent, or other family member. Family members who wish to help can direct contributions to a third-party trust to avoid jeopardizing benefits and support your loved one in a coordinated way.
• Pooled Special Needs Trust. A pooled trust is managed by an unrelated entity, often a nonprofit organization, and combines the assets of many beneficiaries, while maintaining separate accounts.

By directing assets into a properly drafted trust, you can provide financial support for things that enhance your loved one’s life without disqualifying them from benefits. 

How the funds are used is also important. For instance, distributing cash from a trust directly to a beneficiary or using trust funds for housing expenses can reduce SSI. It is essential that the trustee understand the rules for distributions or have a working relationship with an experienced attorney to avoid inadvertently reducing benefits.

Preserving Quality of Life with a Letter of Intent

Just as important as financial stability is your loved one’s quality of life. The supports they need, the routines they follow, and the things that bring them joy might be second nature to you, but communicating that information is essential for success. That is where a Letter of Intent comes in.

This document, while not legally binding, serves as a guide for future caregivers and advocates. You are the expert on your loved one; no one else knows their history and details as you do. Your letter should capture that knowledge in writing, covering areas such as:

• Benefits and supports – Governmental or other benefits they are eligible to receive as well as names and contact information for agencies, case managers, and relatives.
• Daily care routines – Bathing, dressing, feeding, and any adaptations that help them function independently and comfortably.
• Medical information – Doctors’ names, medications, appointment schedules, medical history, and your strategies for navigating the healthcare system.
• Communication tips – What works when encouraging cooperation, reducing frustration, or helping with transitions from one activity to the next.
• Household management – Paying bills, shopping routines, laundry preferences, and meal preparation tips (such as cutting up food to prevent choking).
• Favorite activities and goals – Hobbies, places they love to visit, special trips you both want them to take, and ways to keep them socially connected.

Solicit input from your loved one and people close to them and include anything that will help other caregivers provide consistency, meaning, dignity, and joy. 

Your Letter of Intent should be included with your estate documents so it is readily available when needed. While it won’t carry the legal force of the trust, it will complement it by giving the trustee and caregivers insight into how to use the trust’s resources to best support your loved one.

Communicating Your Plan

Creating the Trust and Letter of Intent is the start—you also need to talk with your family about your intentions so that they understand the importance of contributing to the trust instead of giving money directly to your loved one. These conversations help preserve benefits, prevent misunderstandings, and ensure that everyone is working toward the same goal: protecting your loved one’s future.

Consulting an attorney experienced in special needs planning and a wealth advisor who understands the nuances of these trusts is essential. Different benefit programs have different rules, and professional guidance will help you avoid costly mistakes.

You have spent years advocating for them. With the right planning, you can ensure that care continues even when you are no longer here. That is one of the greatest gifts you can give.

Washington Trust Can Help

Rachael Pierce, the mother of a daughter with special needs, is an attorney and trust officer with Washington Trust Wealth Management who has decades of experience in advocating for and assisting members of the special needs community. Rachael can guide you in creating a thoughtful, detailed Letter of Intent, as well as partner with an attorney to create a properly structured special needs trust. Working together, you can provide your loved one with the financial security and quality of life you wish for them.