October is National Special Needs Law Month, and it’s a good time to look at special needs planning as a whole. Most families come to us asking about one document: “Do we need a special needs trust?” Often the answer is yes. But a trust is one piece of a larger plan, and the families who end up most secure are the ones whose tools were chosen to work together.
This post is designed to walk you through how that larger plan comes together. It starts with the question that shapes everything else and then covers the legal tools California families use to make sure that money is there, protected, and used the way you intend.
Start With the Question Most Families Skip
When parents of individuals with special needs think about the future, they usually think about who will care for their child. Few think about what that care will cost once they are no longer the ones providing it.
That’s understandable. Many of the parents we work with have spent decades doing the work themselves: advocacy, medical coordination, transportation, cooking, personal care, managing IEPs and regional center services. Most don’t get paid for doing this. When we ask families to picture paying professionals to do all of it, the number is often somewhere in the range of $100,000 to $200,000 a year, and it surprises them. Nobody else is going to step in and do that work for free.
This is why the dollar amount matters so much to the legal side of the plan. It tells us how large the special needs trust needs to be, whether life insurance should be part of the funding, which assets should flow where, and how long the money has to last.
Figuring Out How Much Your Child Will Need
To answer the “how much” question, some families find it helpful to work with a financial planner who understands the details involved. Ken Prodger and Scott Gill of Special Needs Planning Group in Santa Clara are two of the colleagues we work with often. About 80% of their clients are special needs families, both hold the Chartered Special Needs Consultant designation, and they work with families throughout California. Ellen sat down with them to talk through how they figure out what a loved one will need.
Once a family has a working number, the legal plan has something concrete to protect. That’s where our part of the work begins.
The Protective Planning Toolkit
Protective planning is the set of legal tools that keep money available for a vulnerable person without putting their benefits, their safety, or the inheritance itself at risk. You can read an overview of how we approach protective planning on our site. Here is how each tool fits for a family with a loved one who has a disability.
Third-Party Special Needs Trusts
For most families, this is the foundation. A third-party special needs trust holds money that belongs to someone other than the beneficiary, usually parents or grandparents, and uses it to supplement what public benefits provide. Because those assets are not in the beneficiary’s name, they don’t count toward the SSI asset limit ($2,000 for an individual under current law) or Medi-Cal’s asset limit. And when your loved one passes away, whatever remains goes to the people you name. There is no Medi-Cal payback.
This type of trust is where families can put their financial planning into action.. It’s where life insurance proceeds, retirement account distributions, and their share of the family estate can land safely, helping to support their loved one throughout their lifetime.
Some families with significant assets tell us they plan to fund the trust generously so their child never has to rely on government benefits. We understand the feeling, but we still recommend keeping eligibility open. Working with those benefits can make the money in the trust stretch much further. And some programs, including certain subsidized housing, require that a person be on Medi-Cal. A well-drafted trust keeps that door open.
Even if your loved one never needs needs-based public benefits, the trust can still play an important role. It provides a management structure for a dedicated pool of resources, helping ensure that money is available to support your loved one and maintain their quality of life throughout their lifetime, without requiring them to manage the money themselves. Our guide to what a special needs trust is covers the details.
First-Party Special Needs Trusts and Pooled Trusts
Sometimes the money already belongs to the person with a disability: a personal injury settlement, back child support, or an inheritance a well-meaning relative left directly to them. A first-party (or “d4A”) special needs trust can hold those funds for persons under the age of 65 and preserve eligibility for needs-based benefits. The tradeoff is that when the beneficiary passes away, Medi-Cal can be repaid from what remains before anything goes to the family.
Pooled (or “d4C”) trusts, run by nonprofit organizations, are another option for a person’s own funds, especially smaller amounts and/or if the person is 65 or older. The right choice depends on the amount, the person’s age, and what the money needs to do. (Please note that our office does not handle pooled trusts, but we are happy to refer you to a trusted professional who does.)
ABLE and CalABLE Accounts
ABLE accounts have become one of the most useful tools available, and 2026 brought two changes families should know about:
- Eligibility expanded. As of January 1, 2026, a person qualifies if their disability began before age 46 (up from age 26). Many more adults can now open an account.
- The annual contribution limit is $20,000, up from $19,000. A beneficiary who works may be able to contribute more of their own earnings through the ABLE to Work provision.
The first $100,000 in an ABLE account doesn’t count against SSI, and the account holder can often manage it themselves, which supports independence. An ABLE account also works well for housing costs, which can reduce SSI when a trust pays them directly.
ABLE accounts have limits, though. The annual cap means they can’t absorb a large inheritance. And depending on the rules in effect when the beneficiary passes away, Medi-Cal may be able to seek reimbursement from what’s left in the account. That’s why we rarely treat ABLE as a replacement for a special needs trust. The two work best as partners: the trust holds the long-term money, and the trustee can move funds into the ABLE account for day-to-day expenses.
Spendthrift Provisions and Discretionary Distributions
A spendthrift clause is designed to protect a beneficiary’s interest in a trust from being transferred or reached by creditors, subject to certain exceptions under California law.. It sounds technical, but its job is simple: it helps keep trust assets from becoming the beneficiary’s personal assets until they are actually distributed to the beneficiary..
Discretionary distributions provide another layer of protection. When the trustee has discretion over when and how much to distribute, the beneficiary generally does not have an automatic right to receive trust assets. This can make it harder for a creditor, divorcing spouse, or other third party to reach assets that remain in the trust.
These protections matter for a loved one who may be vulnerable to pressure or financial exploitation, and it can also be valuable for other family members. For example, an inheritance held in a property drafted special needs trust or Dynasty trust with spendthrift protection and discretionary distributions can provide substantially more protection from creditors, lawsuits, bankruptcy, and divorce than inheritance distributed outright. We explain more in our post on common California trust provisions.
Lifetime/Dynasty Trusts
For some families, their planning goals extend beyond one generation. A dynasty trust can hold assets for your children and then your grandchildren, with the same protections from creditors and divorce carried forward. In California, these trusts can last roughly 90 years, which is long enough to cover a loved one with a disability for life and still benefit the next generation. We covered this in depth in August: see Dynasty Trust Explained and Dynasty Trust vs. Special Needs Trust.
The Letter of Intent
A letter of intent does not create legally binding instructions like the trust document, but a trustee is bound by their fiduciary duty to follow the settlor’s intent. The letter can help the trustee understand that intent, including the settlor’s wishes for their loved one’s care and quality of life. It tells a future trustee and caregivers what they need to know about your loved one: daily routines, medical history and providers, what calms them and what upsets them, the people who matter to them, their preferences about food, activities, and faith, and your hopes for how they’ll live.
In the interview above, Scott made the same point from the financial side: a plan for a special needs trust involves more than dollars and cents. It also depends on “the communication and understanding of values and wishes and aspirations.” Trustees make better decisions when they understand the person they’re serving. A letter of intent gives them that understanding in your words. It’s also easy to update as your loved one grows and changes.
Decision-Making Support
Money is one part of protection. The other is who can help your loved one make decisions. When a child with a disability turns 18, parents lose their automatic legal authority. Depending on your loved one’s abilities, the right tools may include a power of attorney, an advance health care directive, a supported decision-making agreement, or, in some cases, a limited conservatorship. We help families think through which approach fits, and when a limited conservatorship is the right path, we connect them with trusted colleagues who handle those cases. Our post on supported decision-making is a good place to start.
How We Decide Which Tools Your Family Needs
No family needs every tool available. Which ones belong in your plan depends on who you’re protecting and what they may need. When we meet with a family, we work through questions like:
- Who is the plan protecting? A child with a disability, a sibling who may someday become a caregiver, a grandchild, or all of them?
- Does your loved one receive SSI or Medi-Cal now, or might they need to qualify later?
- Whose money is it? Assets from parents and grandparents belong in a third-party trust. The beneficiary’s own funds need a different structure.
- Who will manage the money, and who will make personal and medical decisions?
- How much will your loved one likely need, and where will that money come from?
- What outside risks should the plan anticipate, such as creditors, a sibling’s divorce, or someone taking advantage?
A single parent raising a young adult with autism on a modest budget might need a third-party special needs trust, an ABLE account, updated beneficiary designations, and a thoughtful letter of intent. A family with significant assets and several children might add dynasty trusts for everyone and coordinate with a financial planner on life insurance. Both plans are protective. They’re built for different families.
Coordination is where plans most often break down. A trust can be drafted perfectly and still receive nothing if a life insurance policy or retirement account names the wrong beneficiary. That’s why we work alongside financial planners like Ken and Scott, and alongside your CPA and other advisors, so the numbers and the documents point in the same direction.
The Rules Change, So the Plan Needs Attention
Protective planning happens inside rules that keep moving. In 2026 alone, ABLE eligibility expanded to age 46 and the contribution limit rose to $20,000. California’s Medi-Cal asset limit returned this year at $130,000 for an individual, and it is set to decrease to $21,000 beginning July 1, 2027. Your loved one’s needs will change as well, and so will the lifetime-needs estimate.
A plan that was right five years ago may not be right today. Our Trust Maintenance Program gives members an annual review with our team so the tools in their plan stay aligned with the law and with their family. When you complete your plan with us, TMP is an easy way to keep it working.
We Are Here to Help
Estate planning and special needs planning are much of what we do. Our team works with families across California who want to know their loved one will be cared for and financially secure for life. We’ll help you figure out which tools fit your family, coordinate with the financial professionals you trust, and build a plan that holds up over time.
You’re not alone in this. If you’re ready to start the conversation, click below to schedule a call with our team.
