If you have a child, grandchild, or other loved one with a physical or mental disability who receives Supplemental Security Income (SSI) or Medicaid, leaving them money directly in your will or trust could be the worst thing you do for them financially. An inheritance over $2,000 triggers automatic disqualification from SSI. Medicaid eligibility is similarly affected.
The solution is a Special Needs Trust (SNT) — a legally structured trust that holds and manages assets for the disabled person's benefit without counting as a resource for government benefit eligibility purposes. Done correctly, the SNT allows your loved one to receive the inheritance you intend while keeping every dollar of their government benefits intact.
How SSI and Medicaid Work in Florida
SSI (Supplemental Security Income) provides monthly cash payments to disabled individuals with limited income and resources. In Florida, the federal SSI benefit is approximately $943 per month (2025). Medicaid provides health coverage — often including personal care, therapies, and facility care worth far more than the cash benefit.
Both programs are means-tested — they require that the recipient have limited resources (generally under $2,000 in countable assets). A direct inheritance, even from a well-meaning family member, can disqualify the beneficiary immediately. The beneficiary must spend down the inheritance before benefits are restored.
First-Party vs. Third-Party Special Needs Trusts
| Feature | Third-Party SNT | First-Party SNT |
|---|---|---|
| Who funds it | Parents, grandparents, other family members | The disabled person's own assets |
| Common source of funds | Inheritance, life insurance, gifts | Personal injury settlement, outright inheritance received |
| Medicaid payback at death? | No — remainder to family | Yes — Medicaid paid back first |
| Best for estate planning | Yes — used in wills and trusts | Only when no third-party SNT was in place |
| Florida authority | F.S. § 736.0505; 42 U.S.C. § 1396p(d)(4)(A) | 42 U.S.C. § 1396p(d)(4)(A); F.S. § 736.0505 |
For estate planning purposes, a third-party SNT is almost always preferable. It is funded with your assets — not the disabled person's — so no Medicaid payback is required when the beneficiary dies. Remaining funds pass to your other heirs or designated remaindermen.
What a Florida SNT Can Pay For
The SNT trustee can use trust funds to supplement government benefits by paying for goods and services that SSI and Medicaid do not cover:
Permitted Expenditures
- Electronics — computers, tablets, smartphones, gaming systems
- Entertainment — movies, concerts, sporting events, hobbies
- Travel and vacations — including transportation and accommodations
- Education, tutoring, and vocational training
- Therapy co-pays and non-covered medical services
- Personal care items, toiletries, and grooming
- Clothing and personal belongings
- Furniture and household items
- Vehicle purchase and maintenance
- Companionship services and recreational programs
- Legal fees and advocacy
Prohibited Expenditures — What the SNT Cannot Pay For
The SNT cannot pay for items that SSI already provides — primarily cash, food, and shelter. Paying these from the SNT can reduce the SSI benefit dollar-for-dollar or disqualify the beneficiary. The trustee must be careful about paying rent, utilities, and groceries directly.
Including an SNT in Your Estate Plan
A third-party SNT can be structured in two ways:
Standalone Special Needs Trust
A separate trust document created specifically for the disabled beneficiary. Useful when you want to fund the trust now with gifts, life insurance proceeds, or other assets during your lifetime.
Sub-Trust Within Your Revocable Living Trust
A special needs provision within your existing trust agreement that springs into effect when you die. The disabled beneficiary's share goes into the SNT sub-trust instead of being distributed outright. This is the most common approach and is automatically included in Cornerstone estate plans when a special needs beneficiary is identified.
Choosing a Trustee for a Florida SNT
The SNT trustee must:
- Understand SSI and Medicaid eligibility rules
- Know what expenditures are permitted vs. potentially harmful
- File annual trust accountings if required
- Advocate for the beneficiary's best interests across their lifetime
Options include a trusted family member with proper education, a professional trustee (bank or trust company), or a nonprofit pooled trust managed by an organization that specializes in SNT administration. For large SNTs, a professional or institutional trustee is generally recommended.
Frequently Asked Questions
Protect Your Loved One With a Florida Special Needs Trust
Cornerstone automatically includes Special Needs Trust provisions in estate plans when a disabled beneficiary is identified. Your loved one can receive their full inheritance without losing a single dollar of government benefits.
Start Your Florida Estate Plan →This article is for general informational purposes and does not constitute legal advice. Special needs planning is highly fact-specific. Consult a licensed Florida elder law or estate planning attorney. Arthur Simpson, Esq. is licensed to practice law in the State of Florida.