The Inheritance That Was Supposed to Help Could Destroy Everything

Here’s what nobody tells families: leaving money directly to someone with disabilities can be the worst thing you do for them. SSI has a $2,000 asset limit. A $50,000 inheritance doesn’t supplement their benefits—it eliminates them. They lose Medicaid, burn through the money paying for care that was already covered, and end up worse off than before. Special needs planning lets you provide for their quality of life while preserving the government benefits that cover their basic needs. At Boroja, Bernier & Associates, we help Michigan families get this right.

STATEWIDE SERVICE — Available to All Michigan Residents

When Love Without Planning Causes Harm

You want to provide for a family member with disabilities. Of course you do. You want them to have resources for a better quality of life—money for things that make their days easier, more comfortable, more fulfilling.

But here’s what too many families learn too late: a direct inheritance can be the worst thing that happens to someone who depends on government benefits.

SSI (Supplemental Security Income) and Medicaid have strict asset limits. For SSI, the limit is just $2,000 in countable resources. That’s not a typo. Two thousand dollars. Inherit $50,000 from a well-meaning grandparent? That inheritance doesn’t supplement your benefits—it eliminates them. You’re suddenly ineligible for the programs that pay for housing assistance, medical care, personal care attendants, and other services that cost far more than $50,000 per year.

The money runs out. The benefits are gone. Your loved one ends up worse off than before the inheritance.

We see it constantly: someone receives a lump sum—an inheritance, a settlement, a gift—and within months, they’ve burned through the entire amount paying for care that Medicaid would have covered. Nursing home costs. Personal care attendants. Medical equipment. The inheritance becomes a temporary replacement for benefits, not a supplement to them. When the money’s gone, they reapply for Medicaid, endure the waiting period, and end up right back where they started—except now that $50,000 or $100,000 that could have enriched their life for years is simply gone.

Special needs planning prevents this disaster. Through carefully structured trusts, you can provide supplemental resources for someone with disabilities without counting against their benefit eligibility. The trust pays for quality-of-life enhancements—vacations, electronics, hobbies, therapy beyond what Medicaid covers, a more comfortable living situation—while government benefits continue covering basic needs.

That’s the magic of proper planning. Benefits cover necessities. The trust covers everything that makes life better.

At Boroja, Bernier & Associates, we help Michigan families create special needs plans that actually work. We understand the federal rules, Michigan’s Medicaid requirements, and the practical realities of administering these trusts over a lifetime.

“The most heartbreaking calls we get are from families who just learned that Grandma’s generous bequest disqualified their adult child from Medicaid. They’re facing the loss of benefits worth tens of thousands of dollars per year because of an inheritance that seemed like a blessing. Without proper planning, that inheritance gets spent entirely on care costs—nursing homes, attendants, medical equipment—that Medicaid would have covered. Then when it’s gone, they reapply for Medicaid and start over with nothing. With a properly structured trust, that same money could have enriched their loved one’s life for years while Medicaid continued covering basic needs.”

We serve Michigan families statewide with consultations available by phone, video, or in person at our Shelby Township headquarters.

How Government Benefits Work—And Why Direct Inheritance Is Dangerous

Understanding the Rules That Make Special Needs Planning Essential

To understand why special needs planning matters, you need to understand how means-tested benefit programs work.

SSI (Supplemental Security Income):

SSI provides cash assistance to disabled individuals with limited income and resources. The resource limit is $2,000 for an individual ($3,000 for a couple). “Resources” include bank accounts, investments, cash, and most other assets. Exceed that limit—even briefly—and you lose eligibility. SSI also provides the pathway to Medicaid in many states. Lose SSI, lose Medicaid.

Medicaid:

Medicaid pays for healthcare services that people with disabilities desperately need—doctor visits, hospitalizations, prescriptions, therapy, personal care attendants, group home services, and more. The value of Medicaid coverage for someone with significant disabilities can easily exceed $50,000-$100,000 per year. Medicaid has its own asset limits, which vary by program and state. In Michigan, asset limits depend on the specific Medicaid program, but they’re universally low.

The trap:

Someone receives a $30,000 inheritance. Their countable assets now exceed SSI and Medicaid limits. Benefits stop. They must “spend down” the inheritance—often on things Medicaid would have covered anyway—until assets drop below the limit. Then they reapply for benefits, facing processing delays and gaps in coverage.

That $30,000 “gift” may have cost them $100,000+ in benefits by the time it’s exhausted. And if they spent the money on anything that created additional countable assets, the problem compounds. The inheritance that was supposed to help becomes a temporary replacement for benefits they already had—not an enhancement of their life.

What special needs trusts do:

Assets held in a properly structured special needs trust don’t count as resources for SSI or Medicaid purposes. The trust can hold $500,000, $1 million, or more—and the beneficiary remains eligible for benefits. The trustee uses trust funds to pay for things that enhance quality of life without replacing what government benefits provide.

Third-Party Supplemental Needs Trusts: The Gold Standard for Family Planning

When Parents, Grandparents, or Others Want to Provide—This Is the Best Option

A third-party supplemental needs trust (also called a third-party special needs trust) is funded with assets that belong to someone other than the beneficiary—typically parents, grandparents, or other family members who want to provide for a loved one with disabilities.

This is the best option for families planning ahead. Creating a third-party SNT now—rather than relying on someone to create one after your death—gives you complete control over the trust’s terms and administration.

Key characteristics:

• Funded by others: The money comes from family members, not from the person with disabilities. This could be lifetime gifts, bequests at death, or life insurance proceeds.
• No payback requirement: When the beneficiary dies, remaining trust assets pass to whoever the trust creator designated—typically other family members. There’s no requirement to repay Medicaid or any government program. This is a huge advantage over first-party trusts.
• Maximum flexibility: Because there’s no payback requirement, third-party trusts offer more flexibility in how they’re structured and administered.
• Can be created during life or at death: You can establish a third-party trust now and fund it over time, or your will or revocable living trust can create one that springs into existence at your death.

Why creating the trust now is the best approach:

When you create a third-party SNT during your lifetime—even if you don’t fund it until death—you get to determine everything:

• You choose who receives remaining funds after your disabled beneficiary passes away. Without a pre-existing trust, your personal representative or trustee would need to create one after your death and make these decisions for you.
• You select successor trustees who will manage the trust throughout your beneficiary’s lifetime. You know who you trust—your fiduciary might not.
• You set distribution standards that reflect your values and your beneficiary’s specific needs.
• You control everything instead of leaving critical decisions to others who may not understand your beneficiary’s situation as well as you do.

Additional benefit—revocability during your lifetime:

When you create a third-party SNT while you’re alive, it can be revocable—meaning you can modify it as circumstances change. Need to add additional beneficiaries? Change successor trustees? Update distribution provisions because of changes in the law? No problem. You amend the trust. The 2024 changes to SSI rules regarding food and shelter are a perfect example—trusts created years ago might benefit from updates to reflect the new rules. A revocable trust makes those updates easy.

How families typically use third-party trusts:

Parents with a child who has disabilities: You create a supplemental needs trust now as part of your estate plan. Your will or revocable living trust directs your child’s inheritance to the SNT upon your death. A trustee you choose manages the funds for your child’s benefit throughout their lifetime. Because you created it while alive, you determined the remainder beneficiaries, the successor trustees, and all the trust’s terms.

Grandparents who want to help: Rather than leaving money directly to a grandchild with disabilities—or to the grandchild’s parents hoping they’ll “do the right thing”—grandparents can leave bequests directly to an existing supplemental needs trust that the parents have already established, or create their own third-party SNT through their estate plan.

Life insurance planning: You purchase life insurance to provide for your child’s future. Instead of naming your child as beneficiary (dangerous) or their sibling (hoping the sibling will help), you name the supplemental needs trust as beneficiary. The trust receives the proceeds and manages them for your child’s benefit according to terms you established.

What the trust can pay for:

A supplemental needs trust should pay for things that enhance quality of life without replacing SSI cash benefits or Medicaid-covered services:

• Vacations and travel
• Electronics, computers, entertainment systems
• Education and training beyond what’s publicly funded
• Hobbies and recreation
• Vehicle purchase and maintenance (with careful planning)
• Home furnishings and improvements
• Therapy and treatments not covered by Medicaid
• Companion care and additional attendant services
• Entertainment, dining out, cultural experiences
• Clothing beyond basic necessities
• Personal care items
• Food (as of 2024, food payments no longer affect SSI benefits—see below)

The 2024 rule change on food and shelter:

Important update: As of September 2024, SSA changed the rules for in-kind support and maintenance (ISM). Food is no longer counted against the beneficiary’s SSI benefits. This means third-party trusts, family members, and others can now pay for a beneficiary’s groceries, restaurant meals, and other food expenses without any reduction to their SSI check.

This was a major limitation for years. Now it’s gone.

Shelter still counts. Trust payments for rent, mortgage, property taxes, utilities, and other housing costs continue to reduce SSI benefits under the ISM rules. However, the reduction is capped at the presumed maximum value (PMV), and in some situations—particularly where housing costs exceed the PMV—it makes sense to pay anyway. A knowledgeable trustee understands these trade-offs.

This rule change makes trusts created in recent years even more valuable and is a good reason to review existing SNTs to ensure trustees understand the expanded flexibility.

First-Party Special Needs Trusts: Protecting the Beneficiary’s Own Assets

When Someone with Disabilities Receives Money Directly

Sometimes a person with disabilities receives assets in their own name—an inheritance that wasn’t directed to a trust, a personal injury settlement, a divorce settlement, or accumulated savings. These assets would disqualify them from benefits if held directly. A first-party special needs trust can preserve eligibility.

Key characteristics:

• Funded with the beneficiary’s own assets: The money belongs to the person with disabilities before it goes into the trust. This is what distinguishes first-party from third-party trusts.
• Medicaid payback requirement: When the beneficiary dies, remaining trust assets must first repay Medicaid for benefits provided during the beneficiary’s lifetime. Only after Medicaid is repaid can remaining assets pass to other beneficiaries.
• Age limitation: Under federal law (42 U.S.C. § 1396p(d)(4)(A)), a first-party special needs trust must be established before the beneficiary turns 65. After 65, this option is generally unavailable for new trusts (though pooled trusts may still work—see below).
• Who can establish it: A first-party SNT can be established by the disabled individual themselves, a parent, grandparent, legal guardian, or a court. This gives disabled individuals more control over their own planning when they have capacity to act.

When first-party trusts are necessary:

Personal injury settlements: Your adult child with disabilities is injured in a car accident and receives a $200,000 settlement. Without planning, that money disqualifies them from SSI and Medicaid. A first-party special needs trust holds the settlement, preserving benefits while providing supplemental resources for years—instead of watching the settlement get consumed by care costs Medicaid would have covered.

Inheritances received directly: A relative dies without proper estate planning and leaves money directly to your family member with disabilities. A first-party trust can receive those assets before benefits are lost (timing matters—act quickly).

Divorce or other legal settlements: A person with disabilities receives assets through divorce. Those assets can be transferred to a first-party trust.

Accumulated assets: Someone who develops a disability after accumulating savings may be able to transfer existing assets to a first-party trust to qualify for benefits.

The payback trade-off:

Yes, Medicaid gets repaid from remaining trust assets at death. But consider the alternative: without the trust, the person loses benefits immediately, spends down their assets on care Medicaid would have covered, and ends up with nothing. The payback requirement is the price of preserving eligibility—and it’s almost always worth paying.

Quotable Expert Statement: “Families sometimes hesitate at the Medicaid payback requirement for first-party trusts. But here’s the reality: without the trust, your loved one loses $50,000 or more in annual benefits and burns through their inheritance paying for care Medicaid would have covered anyway. That $200,000 settlement? Gone in 18 months on nursing home costs. With a first-party trust, they keep their benefits for years or decades, enjoy supplemental quality-of-life enhancements the whole time, and Medicaid gets repaid from whatever’s left at the end. One path leads to broke in 18 months. The other leads to a decade of enriched living. The math isn’t close.”

Pooled Trusts: An Alternative for Some Situations

Nonprofit-Managed Options for First-Party Funds

Pooled trusts are another option for first-party funds—assets belonging to a person with disabilities that need protection. They’re managed by nonprofit organizations and “pool” assets from multiple beneficiaries for investment purposes while maintaining separate accounts for each beneficiary.

Key characteristics:

• Managed by nonprofits: A nonprofit organization establishes and administers the trust. Individual beneficiaries have separate sub-accounts, but assets are pooled for investment.
• Available after age 65: Unlike individual first-party trusts, pooled trusts can accept assets from beneficiaries over 65 (though state rules vary on whether this fully avoids transfer penalties).
• Medicaid payback or retention: At the beneficiary’s death, remaining funds either repay Medicaid or stay in the pool to benefit other beneficiaries—depending on trust terms and state rules.
• Professional management: The nonprofit handles administration, investments, and distributions. This can be valuable for families without an appropriate individual trustee.

When pooled trusts make sense:

• The beneficiary is over 65 and cannot use an individual first-party trust
• No appropriate individual trustee is available
• The assets are modest (individual trust administration costs may not be justified)
• The family prefers professional nonprofit management

Limitations:

• Less flexibility than individual trusts
• Fees may be higher for larger accounts
• Trust terms are set by the nonprofit, not customized for your situation
• Some states have restrictions on pooled trust effectiveness for Medicaid

Pooled trusts serve a purpose, but they’re not the gold standard. For most families with the resources to fund a substantial trust, an individually drafted special needs trust offers more control and flexibility.

Choosing a Trustee: The Most Important Decision

Who Will Manage This Trust for a Lifetime?

A special needs trust may last for decades—potentially the entire lifetime of someone with disabilities. Choosing the right trustee is critical. And when you create a third-party SNT during your lifetime, you make this decision—not someone else.

What the trustee does:

• Manages and invests trust assets
• Makes distribution decisions (what to pay for, when, how much)
• Understands and follows government benefit rules—including the 2024 changes on food and shelter
• Keeps records and files any required reports
• Advocates for the beneficiary’s interests
• Coordinates with caregivers, family members, and service providers

Options for trustees:

Family member: A sibling, parent, or other relative who knows the beneficiary well and will advocate for their interests. The challenge: they may lack financial expertise or knowledge of benefit rules, and family dynamics can complicate decisions.

Professional trustee: A bank trust department, trust company, or individual professional. They bring expertise and objectivity but may not know the beneficiary personally and typically charge ongoing fees.

Combination approach: A professional trustee handles investments and administration while a family member serves as “trust protector” or advisor on the beneficiary’s personal needs and preferences. This can offer the best of both worlds.

What to look for:

• Understanding of SSI and Medicaid rules (or willingness to learn)
• Financial competence for long-term asset management
• Genuine concern for the beneficiary’s wellbeing
• Availability and willingness to serve for potentially decades
• Ability to work with the beneficiary, family members, and service providers
• Patience for administrative requirements

What to avoid:

• Someone who might prioritize preserving assets for remainder beneficiaries over current quality of life
• Family members with their own financial instability
• Anyone who doesn’t understand or respect the beneficiary’s needs and preferences
• Trustees who will resent the ongoing responsibility

At Boroja, Bernier & Associates, we help families think through trustee selection carefully. This decision matters as much as the trust document itself. The wrong trustee can undermine the best-drafted trust. The right one makes all the difference.

ABLE Accounts: A Complementary Tool

Tax-Advantaged Savings That Work Alongside Special Needs Trusts

ABLE (Achieving a Better Life Experience) accounts provide another way to save for people with disabilities without affecting benefit eligibility. They’re not a replacement for special needs trusts, but they can work alongside them.

What ABLE accounts offer:

• Tax-advantaged savings (like a 529 plan for disability-related expenses)
• Up to $100,000 can be held without affecting SSI eligibility
• Contributions up to $20,000 per year in 2026 from all sources combined
• Account owned by the person with disabilities
• Can be used for qualified disability expenses (broader than special needs trust distributions)

Eligibility requirements:

• Disability onset before age 46 (expanded from age 26 by the SECURE 2.0 Act, effective January 1, 2026)
• Meet Social Security disability criteria
• Michigan residents can open Michigan ABLE accounts or accounts in other states

Who can open and manage an ABLE account:

The disabled individual can open and manage their own ABLE account. However, if the beneficiary is unable to manage their own finances, an ABLE account can also be established and managed by:

• An agent acting under a power of attorney
• A court-appointed guardian or conservator
• A parent or legal representative
• In some cases, a representative payee

This flexibility makes ABLE accounts accessible even for individuals who cannot manage finances independently.

How ABLE accounts complement special needs trusts:

• ABLE accounts are simpler to establish and administer
• The beneficiary (or their authorized representative) controls the ABLE account
• ABLE accounts can pay for housing and food without the complexity of trust rules
• Trusts can fund ABLE accounts (within contribution limits)
• Trusts remain necessary for larger amounts (ABLE accounts have contribution limits)

Limitations:

• Annual contribution limits ($20,000 in 2026) cap how much can go in each year
• SSI disregards only the first $100,000 (amounts above still count as resources)
• Medicaid payback may apply to remaining funds at death (depending on funding source)
• Not a substitute for trusts when substantial assets are involved

For families with significant resources to protect, ABLE accounts complement special needs trusts—they don’t replace them.

What Happens Without Special Needs Planning

The Consequences of Good Intentions Without Proper Structure

We’ve seen what happens when families don’t plan—or when they plan incorrectly. The consequences are devastating.

Scenario 1: The direct inheritance

Grandpa leaves $75,000 to his grandson with Down syndrome, wanting to help. The grandson loses SSI and Medicaid. His group home costs $4,000/month out of pocket now. The inheritance is exhausted in less than two years paying for services Medicaid would have covered. Then comes the gap—months of reapplying for benefits while care needs continue. That $75,000 that could have enriched his life for a decade—vacations, electronics, special experiences—instead became 18 months of room and board that Medicaid would have paid for anyway.

Scenario 2: The informal arrangement

Parents leave money to their non-disabled daughter, “trusting” her to use it for her brother with disabilities. The daughter has good intentions, but: the money is legally hers, exposed to her creditors and divorce. She struggles to say no to her brother’s requests, spending unwisely. Family relationships fracture over money decisions. And if she provides too much support, it still affects his benefits.

Scenario 3: The wrong trust

A family creates a trust but uses generic language or a template not designed for special needs. The trust doesn’t meet the technical requirements for Medicaid exemption. Assets are counted, benefits are lost—despite having a “trust.”

Scenario 4: The unplanned lawsuit settlement

An adult with disabilities receives a personal injury settlement. The attorney sends a check directly to the client. Within 30 days, SSI and Medicaid notice the bank balance. Benefits terminate. By the time a first-party trust is established, there’s already a gap in coverage and potentially a period of ineligibility. Had the family acted immediately—transferring the settlement into a first-party SNT before benefits were calculated—the client could have kept their benefits while using the settlement for quality-of-life enhancements for years.

Scenario 5: The spend-down-and-reapply cycle

A woman receiving SSI and Medicaid inherits $100,000 from her mother. Without guidance, she loses benefits and uses the inheritance to pay for her care—nursing home costs, medical equipment, personal attendants. Eighteen months later, the money is gone. She reapplies for Medicaid, endures the waiting period, and starts over with nothing. That $100,000 provided zero improvement to her quality of life—it simply replaced what Medicaid had been covering. Had it been placed in a first-party SNT, she would have kept her Medicaid benefits while using the inheritance for things that actually enriched her life: vacations, electronics, hobbies, clothing, experiences. Even with the Medicaid payback at death, she would have gotten years of benefit from the money instead of 18 months of treading water.

The common thread:

Every one of these situations was avoidable with proper planning. The cost of that planning is a tiny fraction of the cost of getting it wrong.

When to Start Special Needs Planning

Earlier Is Always Better

If you have a family member with disabilities—or if you might leave assets to someone with disabilities—special needs planning should be part of your estate plan now.

For parents of children with disabilities:

Don’t wait until your child is an adult. Your estate plan should address what happens if you die while your child is still young. Who will care for them? Who will manage resources? How will their benefits be protected?

As your child grows, planning evolves. Adult children may need different supports than minor children. Transitions from school-based services to adult services create new considerations. Planning is ongoing, not one-time.

For grandparents and other relatives:

If you plan to leave anything to a grandchild, niece, nephew, or other relative with disabilities, your estate plan must account for it. Leaving money directly—even with good intentions—can cause harm. Leave assets to an existing special needs trust, or have your estate plan create one.

For people who might develop disabilities:

Some disabilities emerge later in life. If you develop a condition that may lead to disability and benefit eligibility, planning early—while you still have capacity—preserves options.

For families navigating unexpected events:

If a family member with disabilities suddenly receives assets—an inheritance, settlement, or other windfall—act immediately. Time matters. A first-party trust established before benefits are lost avoids the gap in coverage. Once benefits terminate, damage is done even if you create a trust later.

Common Questions About Special Needs Planning in Michigan

When to Talk to a Michigan Special Needs Planning Attorney

Consider scheduling a consultation if:

• You have a child, grandchild, or other family member with disabilities
• Someone you care about receives SSI, Medicaid, or other means-tested benefits
• You want to leave an inheritance to someone with disabilities without harming their benefits
• A family member with disabilities has received or may receive money (inheritance, settlement, etc.)
• You’re a parent planning for what happens when you’re no longer able to care for your child
• You need to establish or fund a first-party special needs trust
• You’re serving as trustee of a special needs trust and need guidance
• You want to understand how special needs planning fits into your overall estate plan

At Boroja, Bernier & Associates, we help Michigan families create special needs plans that protect their loved ones for a lifetime. We understand the rules, we draft trusts that work, and we help families think through the practical realities of long-term trust administration.

This isn’t template work. Every family’s situation is different. Every beneficiary has unique needs. We take the time to understand yours.

They Deserve Both: Benefits That Cover Needs and Resources That Enrich Life

Your family member with disabilities deserves both—government benefits that cover essential needs and supplemental resources that enhance their quality of life. Special needs planning makes both possible.

Without proper planning, you’re forced into a terrible choice: leave them nothing (so they keep benefits) or leave them something (and watch benefits disappear while the inheritance gets consumed by costs Medicaid would have covered). That’s not a choice any family should have to make.

At Boroja, Bernier & Associates, we help Michigan families create trusts that work within the rules, protect benefit eligibility, and provide meaningful support for loved ones with disabilities. We take the time to understand your family’s situation, explain your options clearly, and build a plan that lasts.

This is what raising the standard looks like. Not generic templates. Not one-size-fits-all solutions. Plans built for your family—because too much is at stake to get it wrong.

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Email: admin@bbalawmi.com

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