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By Thomas Rindahl, CFP

A common concern when family members have special needs is making sure that our loved ones will have enough assets to survive in life. But what happens when you try to help someone? It always messes something up! You know that old saying, “no good deed goes unpunished.” That is especially true when it comes to special needs planning.

Thomas Rindahl, PhD, MBA, CLU®, ChFC®, CFP®, LUTCF, BFATM, is a financial advisor in Tempe, AZ. Through comprehensive and holistic financial planning, he has helped his clients to navigate the twists and turns of life for over 20 years.

Thomas Rindahl

Many individuals will qualify for governmental assistance. Unfortunately, if they inherit a chunk of change (large or small), it may inadvertently disqualify them from the government assistance they were getting. Here are some strategies you can consider when looking to plan for your loved ones.

A Special Needs Trust

The Special Needs Trust is one option. There are three basic funding methods for the trust:

1) Self-settled: Money originated by the special needs individual

2) Third-party: Someone else’s money is funding the trust

3) Pooled: Funded by others and administered, generally, by a non-profit. This is a viable option for smaller estates or in case there isn’t a clear choice for a trustee to administer the trust.

In all three forms, the special needs individual is the beneficiary of the trust but is not the owner of the funds, thus avoiding issues that will disqualify the individual from governmental support. That individual does need to be under age 65 when the trust is established.

Please remember that you cannot use the money in a special needs trust for just anything. There are rules for trust distributions. You can distribute funds to pay for medical expenses and dental expenses not covered by other benefits, groceries, public transportation, travel, clothing, education, insurance, legal services, burial expenses, vacations, cleaning services, and appliances.


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The ABLE Account

The ABLE account is another option. The ABLE (Achieving a Better Life Experience) account was established in 2014 and offers a tax-free savings account that can also be used to pay for the special needs individual’s expenses, without affecting any other governmental support received. Anyone can contribute to the account, but it is subject to a maximum total contribution limit of $16,000 for 2022. If the balance goes over $100,000, government benefits could be affected until the balance is reduced again. It also requires that the beneficiary of the account be under age 26 when disabled for the account to be established.

Trust Distributions upon Death of Beneficiary

What happens when the beneficiary eventually passes away? Any remaining funds in the self-settled and pooled special needs trusts and ABLE account will go to pay back the government (and non-profit, in the case of the pooled special needs trust). The third-party special needs trust does not have this requirement.

You may also like: Financial Planning for Families with Special Needs

About the author: Thomas Rindahl

Thomas Rindahl, PhD, MBA, CLU®, ChFC®, CFP®, LUTCF, BFATM, is a financial advisor in Tempe, AZ. Through comprehensive and holistic financial planning, he has helped his clients to navigate the twists and turns of life for over 20 years.

Securities offered through Securities America, Inc., Member FINRA/SIPC. Advisory services offered through PFG Advisors. TruWest Wealth Management Services, TruWest® Credit Union, Securities America, and PFG Advisors are separate entities. Securities, insurance, and advisory offered through Securities America, PFG Advisors or their affiliates are: Not NCUA insured. No credit union guarantee. Not credit union deposits or obligations. May lose value.