Caring for a family member with a disability requires planning that goes far beyond a standard will or trust. The stakes are high: without the right structure in place, an inheritance or insurance settlement intended to improve a disabled loved one’s life could instead disqualify them from Medicaid and Social Security benefits they depend on daily. Special needs planning is the area of estate law designed to solve exactly this problem, allowing families to provide for a disabled individual’s long-term needs without jeopardizing their government benefits. This article covers the main tools available to Utah families, including first-party and third-party special needs trusts and the increasingly valuable ABLE account.
Understanding the Problem: Benefits and Asset Limits
Medicaid and Supplemental Security Income (SSI) are means-tested benefits, meaning eligibility depends on having limited income and assets. In most cases, an individual must have very few countable assets to qualify. When a person with a disability receives an inheritance, a lawsuit settlement, or other funds in their own name, those assets may push them over the eligibility limit, cutting off benefits until the funds are spent down. Special needs planning tools are designed to hold those assets in a way that supplements government benefits rather than replacing them.
First-Party Special Needs Trusts
A first-party special needs trust, sometimes called a self-settled trust, is funded with the disabled individual’s own assets. It is typically used when someone with a disability receives a legal settlement, an inheritance they were not expecting, or other funds in their own name that would otherwise disqualify them from benefits.
There is an important restriction: this type of trust can only be established for individuals who are 65 years of age or younger. It is also what is known as a payback trust. When the beneficiary passes away, the state must be reimbursed up to the amount it paid for the individual’s Medicaid care before any remaining funds can pass to other named beneficiaries. Despite this payback requirement, a first-party trust still provides significant value by allowing the individual to maintain both their assets and their benefits during their lifetime.
Third-Party Supplemental Needs Trusts
A third-party supplemental needs trust is the more commonly used tool for parents and grandparents who want to provide for a child or grandchild with a disability. This type of trust is funded with the assets of someone other than the disabled individual, such as a parent’s estate or a grandparent’s gift. It can be established at any age, and there are no age restrictions.
The third-party trust is also more favorable in that it is not a payback trust. When the disabled beneficiary passes away, the remaining assets in the trust can go to whatever other beneficiaries are identified in the trust document. This means a family can provide generously for a disabled loved one while also preserving what remains for other children or grandchildren.
In both cases, the trust is designed to cover what Medicaid and Social Security do not: things like personal care items, transportation, education, recreation, and other quality-of-life expenses that government programs will not fund.
The ABLE Account: A Flexible Savings Tool
Alongside special needs trusts, the ABLE account has become an increasingly popular planning tool for individuals with disabilities. Modeled after the 529 college savings account, an ABLE account allows families to save money for a disabled individual in a tax-free environment. The funds can be used for a wide range of qualifying expenses, and the account does not affect Medicaid or SSI eligibility as long as the balance stays under $100,000.
Third parties, including parents, grandparents, and other relatives, can contribute up to $19,000 per year to an ABLE account on behalf of the beneficiary. The disabled individual can also contribute their own earned income, up to $15,000 per year. Funds grow tax-free and can be withdrawn for qualifying disability-related expenses without penalty.
Like a first-party special needs trust, an ABLE account is a payback arrangement. When the account holder passes away, any remaining funds may be used to reimburse the state for Medicaid costs before passing to other beneficiaries. For many families, ABLE accounts work best as a complement to a third-party trust rather than a replacement for one.
The 2026 Age Eligibility Expansion
One of the most meaningful recent changes to ABLE account rules is the expansion of eligibility. Previously, only individuals who became disabled before age 26 could open an ABLE account. Starting in 2026, that threshold is increasing to age 46. This is a significant change that opens the program to a much larger population, including many working-age adults who acquired a disability later in life and have previously been unable to access ABLE benefits.
If you or a family member was previously ineligible due to the age restriction, this update makes it worth revisiting the ABLE account as part of your planning toolkit.
Putting the Pieces Together
The right combination of planning tools depends on each family’s unique situation, the nature and severity of the disability, the assets involved, and the long-term goals. For many families, a third-party supplemental needs trust created by a parent or grandparent, combined with an ABLE account, provides both a structured long-term vehicle and a flexible short-term savings tool. For individuals who receive unexpected funds in their own name, a first-party trust may be the necessary solution.
What matters most is that no planning happens in isolation. An estate attorney who understands special needs law can help coordinate your will, trust, beneficiary designations, and ABLE account into a plan that holds together across every scenario.
