10/21/2026
How can you provide financial support for a disabled loved one without risking their government benefits? 💙📜
Many families want to leave an inheritance, gift, or financial safety net for a child or relative with special needs, but a direct cash gift can accidentally disqualify them from essential government assistance like Medicaid, Supplemental Security Income (SSI), and Section 8 housing.
In this episode of the Protect Your Nest Podcast, titled "What Is a Special Needs Trust?", Louisville estate planning attorney Brandon J. Lawrence ("Lawyer for the City") explains how to properly set up a Special Needs Trust (SNT) to fund medical, educational, and recreational care while keeping vital public benefits fully intact.
Here are 5 critical takeaways every Kentucky family needs to know:
🔹 1. First-Party vs. Third-Party Special Needs Trusts: The main difference is where the money comes from. A First-Party SNT is funded with the disabled individual's own assets (such as a personal injury settlement or direct inheritance). It must be irrevocable, and Medicaid has the right to seek reimbursement after the beneficiary passes away. A Third-Party SNT is funded by family members (like parents or grandparents) before the beneficiary turns 65, requires no Medicaid payback upon death, has its own Employer Identification Number (EIN), and stays completely private without court filing in Kentucky.
🔹 2. Protecting Critical Benefit Eligibility Limits: To remain eligible for government assistance, individuals face strict financial caps. In Kentucky, Medicaid limits countable assets to $2,000, SSI caps monthly income at $994, and Section 8 housing limits total assets to $105,574. Assets held within an SNT do not count against these resource limits.
🔹 3. The Power of a Letter of Intent: Alongside a Third-Party SNT, grantors can write a Letter of Intent to guide caregivers and trustees. This document outlines personalized medical, dietary, educational, and recreational preferences, ensuring your loved one maintains the highest quality of life.
🔹 4. Common Drafting Mistakes to Avoid: Never use standard "health, education, maintenance, and support" (HEMS) language in a Third-Party SNT, as it can give the appearance of direct beneficiary control over funds. Additionally, never make a disabled child a direct pay-on-death (POD) beneficiary or name them as a successor trustee.
🔹 5. Pooled Trusts for Added Flexibility: For families seeking another option, a Pooled Trust combines resources for multiple individuals with disabilities under a single master trust. Unlike a Third-Party SNT, there is no age restriction to start a Pooled Trust.
Don't let a well-intentioned inheritance jeopardize your loved one's care—roadmap a Special Needs Trust today!
👉 Learn more and watch full episodes: http://www.LawyerForTheCity.org
📞 Schedule a consultation: (502) 424-3130 / (502) 996-7735
Contact Information
Lawyer for the City
101 N. 7th Street
Louisville, Kentucky 40202
Phone: (502) 424-3130 / (502) 996-7735
Email: [email protected]
Website: http://www.LawyerForTheCity.org
Disclaimer
This podcast is meant to provide information and is not legal advice. Brandon’s principal office is located at 101 N. 7th Street, Louisville, Kentucky 40202.
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