This session will explore key elements of special needs trusts, including their primary purpose of preserving public benefits and secondary benefits like fiduciary protection, caregiving, and asset management. Learn about common pitfalls such as confusing benefit programs, improper trust drafting, poorly planned management teams, and ineffective administration practices.
This webinar is ideal for professionals, caregivers, and anyone planning for the future of a loved one with disabilities. Gain insights to avoid costly errors, ensure financial and legal safeguards are in place, and better understand the nuances of this unique planning process.
Planning for a loved one with disabilities comes with unique challenges. You want to ensure they have the financial security and resources they need while also protecting their eligibility for essential benefits like Supplemental Security Income (SSI) and Medicaid. A Special Needs Trust (SNT) is one of the most effective tools for achieving this balance, but it must be set up and managed correctly to work as intended.
Unfortunately, many families make critical mistakes when creating or handling these trusts. These errors can lead to lost benefits, unnecessary legal complications, and financial hardships that could have been avoided with the right planning. The good news is that by understanding the most common pitfalls, you can take steps to protect your loved one’s future.
A special needs trust isn’t just a place to hold money—it’s a safety net that allows a person with disabilities to have extra financial support without losing their government benefits.
Beyond that, a well-structured trust:
When set up correctly, a special needs trust can make life easier, safer, and more fulfilling for someone with disabilities. But setting it up the wrong way can lead to serious problems.
Even with the best intentions, families often make critical errors when creating and managing a special needs trust. These are some of the biggest pitfalls—and how to steer clear of them.
Not all special needs trusts work the same way. A major mistake families make is not knowing the difference between a First-Party SNT and a Third-Party SNT.
Mislabeling a trust can create serious financial consequences. If you set up a First-Party Trust when you really needed a Third-Party Trust, you could end up owing Medicaid a lot of money unnecessarily.
Simply creating a trust isn’t enough—it has to be funded properly. Unfortunately, many families don’t realize this until it’s too late.
A common mistake is leaving money or assets directly to the person with disabilities instead of placing them in the trust. This can cause them to lose benefits. Another mistake is forgetting to update important documents, like:
If these documents aren’t updated, assets might accidentally go directly to the individual, creating a financial mess that could have been avoided.
A trustee is the person (or organization) responsible for managing the trust. Choosing the wrong trustee is one of the biggest mistakes families make.
Many people assume a close family member should handle the trust. That can work in some cases, but it often leads to problems if the person isn’t familiar with SSI, Medicaid, or financial management. Even well-meaning trustees can mismanage funds, pay for the wrong things, or fail to keep proper records—all of which can put benefits at risk.
A better option is often a professional trustee, such as:
If a family member is involved, consider having a trust advisory committee to oversee decisions and ensure everything is being handled correctly.
Laws and regulations around SSI, Medicaid, and special needs trusts change over time. A trust that was legally sound five years ago might no longer be in compliance today.
Some of the biggest changes have involved how trusts interact with Medicaid rules, tax laws, and ABLE accounts. If a trust isn’t updated, the beneficiary could:
The best way to prevent this is by reviewing the trust regularly with a special needs trust attorney. A quick review every couple of years can make a big difference in avoiding future problems.
Many families focus only on the special needs trust and forget about ABLE accounts. But the two can actually work together to give the beneficiary more flexibility.
ABLE accounts allow individuals with disabilities to save money tax-free while keeping their benefits. Unlike a trust, an ABLE account gives the beneficiary direct control over funds—something many people with disabilities want.
An ABLE account can be used for things like:
By using an ABLE account alongside a special needs trust, families can provide financial security while still allowing their loved one some financial independence.
Setting up a special needs trust can be tricky to figure out on your own. There are too many rules, too many potential mistakes, and too many financial risks.
A special needs trust attorney can help by:
Trying to do this alone—especially with online templates or DIY legal services—can lead to expensive mistakes that could jeopardize your loved one’s future.
One of the biggest mistakes families make is assuming everything will work as planned without testing it.
A good special needs plan isn’t just about having the right documents—it’s about making sure those documents function correctly in real life. Families should ask:
It’s better to test the plan now, while changes can still be made, rather than discovering problems when it’s too late.
A special needs trust is one of the best ways to secure a loved one’s financial future, but only if it’s set up and managed correctly. By avoiding these common mistakes, families can ensure that their loved one has the resources they need without losing access to essential benefits.
At Michigan Law Center, we’re here to help families and individuals safeguard their futures. If you have questions or need assistance, contact us, explore our webinars and resources, subscribe to our YouTube channel, or reach out to us with suggestions for future topics. We’d love to hear from you.
