A Michigan family’s plan for a loved one with a disability has to accomplish two things at once: protect financial resources and preserve eligibility for the public benefits that person depends on. Getting one right while failing the other can be devastating — and it happens more often than most families realize.

Special needs planning in Michigan typically involves three core tools:

• first-party special needs trusts,

• third-party supplemental needs trusts, and

• ABLE accounts.

Each serves a distinct purpose, carries different rules, and — when used correctly — complements the others in ways that provide both protection and autonomy for the person with a disability.

The stakes changed significantly on January 1, 2026, when the ABLE Age Adjustment Act expanded eligibility for ABLE accounts from individuals whose disability onset occurred before age 26 to those with onset before age 46. That single change opened the door for millions more Americans — and thousands more Michigan families — to use ABLE accounts as part of a coordinated special needs plan.

At Boroja, Bernier & Associates, our estate planning attorneys help Michigan families across the state build special needs plans that coordinate these tools effectively, ensuring benefits are preserved, assets are protected, and your loved one’s quality of life is prioritized. Here is what every Michigan family should understand about how these planning vehicles work — and how the 2026 ABLE expansion changes the calculus.

What Are the Three Core Tools in Michigan Special Needs Planning?

Special needs planning in Michigan revolves around three primary vehicles, and the right combination depends on one threshold question: who owns the money?

The source of the funds determines whether a trust must be classified as first-party (self-settled) or third-party — and that classification dictates nearly everything about how the trust is drafted, administered, and ultimately resolved. ABLE accounts, meanwhile, function as a flexible spending vehicle that complements either trust type.

First-Party Special Needs Trusts: When the Person with a Disability Owns the Assets

A first-party special needs trust (often called a “(d)(4)(A) trust” after its authorizing statute, 42 U.S.C. § 1396p(d)(4)(A)) is used when the person with a disability already owns or will receive assets outright. Common scenarios include personal injury settlement proceeds, an inheritance received directly (rather than through a properly structured trust), lottery winnings, or retroactive Social Security back-payments.

The core statutory requirements include:

• The beneficiary must be under age 65 at the time the trust is created
• The trust must be established for the sole benefit of the individual with a disability
• It must be established by a parent, grandparent, legal guardian, or court
• The trust must contain a Medicaid payback provision — meaning that at the beneficiary’s death, the state of Michigan is reimbursed for Medicaid benefits paid during the beneficiary’s lifetime before any remaining assets pass to other beneficiaries

That Medicaid payback requirement is the critical distinction. It is the price of sheltering the beneficiary’s own assets from being counted for means-tested benefit eligibility.

Administration is conservative by design. Trustees must carefully document that every distribution benefits the trust beneficiary directly and must avoid creating problems with SSI in-kind support and maintenance rules — particularly around food and shelter payments. Most first-party SNTs are taxed as non-grantor trusts, requiring their own EIN and annual Form 1041 filings, though Qualified Disability Trust treatment under IRC § 642(b)(2)(C) may apply.

Michigan’s estate recovery statute (MCL 400.112k) adds another layer of planning complexity, as it governs how the state recovers Medicaid expenditures — making proper trust drafting and administration even more consequential.

Third-Party Supplemental Needs Trusts: When Someone Else’s Money Funds the Plan

A third-party supplemental needs trust is the preferred vehicle when the funding comes entirely from someone other than the beneficiary — parents leaving an inheritance, grandparents making lifetime gifts, or a family member designating the trust as beneficiary of a life insurance policy or retirement account.

Because the assets were never the beneficiary’s own property, third-party SNTs do not require a Medicaid payback provision. This is a significant advantage. It means that after the beneficiary’s death, remaining trust assets can pass to family members or other beneficiaries chosen by the trust creator — not to the state.

Third-party trusts also offer greater drafting and administrative flexibility:

• Distributions are fully discretionary — the trustee decides what, when, and how much to distribute
• The trust uses “supplemental” intent language — designed to supplement, not replace, public benefits
• The trust avoids mandatory support standards (like HEMS language common in other trusts) that could be construed as giving the beneficiary a right to compel distributions

Many Michigan families don’t realize that the way an inheritance is structured matters more than the amount. A parent who leaves $200,000 directly to a child with a disability in their will — rather than directing those assets into a properly drafted third-party SNT — can inadvertently disqualify that child from SSI and Medicaid. The child then faces the impossible choice of spending down the inheritance to regain benefits or funding a first-party trust with a Medicaid payback obligation that could have been avoided entirely.

This is one of the most common and costly mistakes in Michigan estate planning for families with a disabled loved one: converting what should be a third-party planning opportunity into a first-party problem because the inheritance reaches the beneficiary’s hands first.

ABLE Accounts: Beneficiary-Controlled Spending with Benefit Preservation

ABLE accounts (Achieving a Better Life Experience), authorized under 26 U.S.C. § 529A, are tax-advantaged savings accounts that allow individuals with qualifying disabilities to save and spend on qualified disability expenses — including housing, transportation, education, assistive technology, health care, and basic living expenses — without jeopardizing means-tested benefits like SSI or Medicaid.

Michigan residents can open ABLE accounts through the MiABLE program administered through the National ABLE Alliance. Michigan’s ABLE enabling legislation is found at MCL 206.981–206.997, which establishes the state framework for tax-advantaged disability savings accounts consistent with federal requirements under 26 U.S.C. § 529A.

Unlike a trust, which requires a trustee to approve and process every expenditure, an ABLE account gives the beneficiary (or an authorized individual acting on their behalf) direct control over spending. This autonomy is significant. It means the person with a disability can pay for everyday expenses — a rideshare to a medical appointment, an adaptive device, groceries — without waiting for trustee approval.

The 2026 annual contribution limit is $20,000 (up from $19,000 in 2025), and account balances up to $100,000 are excluded from the SSI resource limit. Working beneficiaries may contribute additional amounts above the standard limit under “ABLE to Work” provisions, subject to annual regulatory limits.

The 2026 ABLE Expansion: Why It Matters for Michigan Families

Before January 1, 2026, ABLE account eligibility required that the individual’s qualifying disability or blindness had its onset before age 26. That single threshold excluded a vast number of people whose disabilities resulted from events later in life — a car accident at 30, a diagnosis of multiple sclerosis at 35, a traumatic brain injury at 40.

As of January 1, 2026, the ABLE Age Adjustment Act (implemented through the SECURE 2.0 Act) expanded the onset threshold from before age 26 to before age 46. This is one of the most significant expansions of disability financial planning tools in a generation. Under Michigan’s ABLE Account Act (MCL 206.981–206.997), the state framework aligns with the expanded federal eligibility standards, allowing Michigan residents who meet the new onset threshold to open and contribute to MiABLE accounts.

The practical impact for Michigan families is substantial:

• Adults who acquired disabilities in their 20s, 30s, or early 40s — from accidents, illness, or progressive conditions — are now eligible to open and use ABLE accounts for the first time
• Veterans with service-connected disabilities with onset before age 46 gain a new tax-advantaged planning tool
• Families who previously relied solely on SNTs now have a complementary vehicle that gives the beneficiary spending autonomy without trustee involvement for every purchase
• Individuals already receiving SSI or Medicaid with later-onset disabilities can now shelter up to $100,000 in an ABLE account without affecting benefit eligibility

In our experience serving Michigan families statewide, the 2026 ABLE expansion has already prompted families to revisit existing special needs plans. Plans that were optimally structured under the old rules may now benefit from adding an ABLE account component — or adjusting how much the trustee contributes to the ABLE account annually.

How SNTs and ABLE Accounts Work Together: The Coordinated Approach

The most effective special needs plans do not rely on a single tool. They coordinate all three vehicles so that each does what it does best.

The trust — whether first-party or third-party — holds and protects the large capital base. This is where settlement proceeds, inheritance funds, or family gifts are invested and managed under professional trustee oversight. The trust provides creditor protection, undue influence protection, and long-term investment management that an ABLE account cannot replicate.

The ABLE account serves as the beneficiary’s “spending account.” The trustee makes periodic contributions from the SNT to the ABLE account (subject to the $20,000 annual limit), and the beneficiary uses those funds autonomously for qualified disability expenses.

This coordinated structure accomplishes several goals simultaneously:

• Reduces administrative friction — the beneficiary does not need to contact the trustee for routine purchases
• Preserves benefit eligibility — both the trust and the ABLE account are structured to protect SSI and Medicaid
• Provides meaningful autonomy — the person with a disability controls their own day-to-day spending
• Maintains oversight — the trustee retains authority over the primary fund and decides how much flows into the ABLE account each year
• Optimizes tax treatment — ABLE account earnings grow tax-free when used for qualified disability expenses

Under MCL 700.7103 and related Michigan trust provisions, trustees have broad authority to make distributions that benefit the trust beneficiary — including contributions to an ABLE account where doing so serves the beneficiary’s interests and the trust’s purposes.

Common Mistakes Michigan Families Make in Special Needs Planning

The core trap in special needs planning is failing to coordinate — or failing to plan at all.

Families who skip professional planning often make one or more of these costly errors:

• Leaving assets directly to a person with a disability. A parent’s will that says “I leave $150,000 to my son” — without routing those funds through a third-party SNT — can disqualify that son from SSI and Medicaid the moment the inheritance is received. Fixing this mistake after the fact requires a first-party trust with Medicaid payback, court involvement, and significantly higher costs.

• Assuming ABLE accounts replace trusts. ABLE accounts are powerful but limited. The $20,000 annual contribution cap and $100,000 SSI exclusion mean they cannot serve as the sole repository for large sums. A $300,000 inheritance cannot simply be deposited into an ABLE account — it requires a trust.

• Neglecting to update plans after the 2026 ABLE expansion. Families with existing special needs trusts may not realize their loved one is now ABLE-eligible under the expanded onset rules. Without updating the plan, they miss the opportunity to add a beneficiary-controlled spending component.

• Using the wrong trust type. Establishing a first-party trust when a third-party trust is available wastes the opportunity to avoid Medicaid payback. The difference can mean tens or hundreds of thousands of dollars remaining for the family rather than being repaid to the state.

At Boroja, Bernier & Associates, we build special needs plans that coordinate trusts and ABLE accounts from the start — and we help families with existing plans update them to take advantage of the 2026 changes. Special needs trusts are typically drafted as standalone instruments separate from a family’s base estate plan. At our firm, first-party and third-party special needs trusts each typically range from $3,500 to $4,500, depending on the complexity of the beneficiary’s circumstances, benefit programs involved, and coordination requirements. These are in addition to the family’s comprehensive trust-based estate plan ($2,500–$5,500), which establishes the foundational documents — revocable trust, wills, powers of attorney, and advance directives — that the special needs trust integrates with.

Frequently Asked Questions About Special Needs Planning in Michigan

What is the difference between a first-party and third-party special needs trust?

The difference is the source of the funds. A first-party SNT is funded with assets that belong to the person with a disability (settlement proceeds, inheritance received outright, back benefits). A third-party SNT is funded with assets that belong to someone else (parents, grandparents, other family members). First-party trusts require a Medicaid payback provision at the beneficiary’s death; third-party trusts do not. This distinction affects how much ultimately remains for the family and how the trust is administered.

Who is eligible for a Michigan ABLE account after the 2026 changes?

As of January 1, 2026, individuals whose qualifying disability or blindness had its onset before age 46 are eligible for an ABLE account. Previously, onset had to occur before age 26. Eligible individuals must also meet one of the listed entitlement or diagnosis pathways, which include receiving SSI or SSDI, or obtaining a physician’s certification of a qualifying condition. Michigan residents can open accounts through the MiABLE program, governed by the Michigan ABLE Account Act (MCL 206.981–206.997).

How much can be contributed to an ABLE account in 2026?

The 2026 annual contribution limit is $20,000. This is up from $19,000 in 2025. Contributions can come from any source — the beneficiary, family members, friends, or even distributions from a special needs trust. Working beneficiaries may be able to contribute additional amounts above the standard limit under “ABLE to Work” provisions, subject to specific regulatory caps that should be confirmed annually.

Can a trustee contribute from a special needs trust to an ABLE account?

Yes. Trustees commonly make periodic contributions from an SNT to the beneficiary’s ABLE account, subject to the annual contribution limit. This is one of the most effective ways to give the beneficiary spending autonomy for qualified disability expenses while the trust maintains control over the larger asset pool. The contribution counts toward the annual limit regardless of its source.

What happens to ABLE account funds when the account holder passes away?

Remaining ABLE account funds are subject to a Medicaid payback claim for any Medicaid benefits paid after the account was established. After the state is reimbursed, any remaining balance passes to the account holder’s estate or designated beneficiary. This payback rule applies to ABLE accounts specifically — it does not extend to third-party supplemental needs trusts, which is one reason the coordinated SNT-plus-ABLE approach is valuable.

Do I need to update my existing special needs plan because of the 2026 ABLE changes?

Many families should review their existing plans. If your loved one’s disability onset occurred between ages 26 and 45, they may now qualify for an ABLE account for the first time. Even if the existing trust is working well, adding an ABLE account component can improve daily quality of life by giving the beneficiary spending independence for routine expenses. An estate planning attorney can evaluate whether your current plan should be updated.

How much does special needs planning cost in Michigan?

Special needs trusts at Boroja, Bernier & Associates typically range from $3,500 to $4,500 per trust — whether first-party or third-party — depending on the complexity of the beneficiary’s situation and benefit programs involved. These are drafted as standalone instruments separate from the family’s base estate plan. Most families also need a comprehensive trust-based estate plan ($2,500–$5,500) that includes the revocable trust, wills, powers of attorney, and advance directives the special needs trust coordinates with. Plans involving both a base estate plan and one or more SNTs, plus ABLE account coordination, represent a meaningful investment — but the cost of not planning (potential disqualification from benefits, Medicaid payback obligations that could have been avoided, or court proceedings to fix preventable mistakes) almost always exceeds the cost of doing it right the first time.

Protect Your Loved One’s Future — and Their Independence

Special needs planning is not just about preserving eligibility for government benefits. It is about building a structure that protects your loved one financially while giving them the dignity and autonomy they deserve. The 2026 ABLE expansion has created new planning opportunities that did not exist before — but those opportunities only matter if families take action to use them.

At Boroja, Bernier & Associates, we help Michigan families throughout the state build coordinated special needs plans that bring together trusts, ABLE accounts, and benefit preservation strategies into a single, cohesive framework. With offices in Shelby Township, Troy, Ann Arbor, and Lansing, our estate planning attorneys serve families statewide — because every Michigan family with a disabled loved one deserves a plan built with precision, not guesswork.

To schedule a consultation with the Michigan estate planning attorneys at Boroja, Bernier & Associates, call our law offices at (586) 991-7611. The best time to build the right plan is before a crisis forces you into a more expensive one.