Most government benefit programs for people with disabilities come with a hard asset limit. For Supplemental Security Income, that ceiling is $2,000. For Medicaid, the rules vary but the threshold is similarly low. A person who receives an inheritance, a lawsuit settlement, or a generous gift can lose those benefits the moment their countable assets cross the line.

A special needs trust – also called a supplemental needs trust under Florida law – is how families protect against that outcome. Assets held in a properly drafted trust are not counted as the beneficiary’s resources for SSI or Medicaid purposes. There is no cap on how much can go into one. And unlike a standard inheritance, a transfer into a special needs trust does not trigger a Medicaid transfer penalty.

Florida recognizes supplemental needs trusts under section 732.2025(8) of the Florida Statutes. The federal authority comes from 42 U.S.C. § 1396p(d)(4), which sets the framework for how these trusts must be structured to preserve benefits.

Why a regular inheritance can backfire

A well-meaning grandparent leaves $50,000 directly to a grandchild with a disability. The gift is received. Within weeks, that grandchild is over the SSI asset limit and loses both their monthly benefit check and their Medicaid coverage. The money intended to help them has instead cut off the support they depend on.

This is not a hypothetical. It happens regularly, and it is entirely preventable. If the inheritance had been directed into a special needs trust instead, the grandchild could have received the full benefit of those funds without losing a single government benefit.

The three types of special needs trusts in Florida

Not all special needs trusts are the same. Which type applies depends on where the money is coming from.

1. Third-party trusts are the most common. They are funded with someone else’s money – a parent’s savings, a grandparent’s estate, a life insurance policy. The person with the disability never owns those funds; they flow directly into the trust. When the beneficiary dies, whatever remains goes to the family or other designated beneficiaries. There is no requirement to pay back Medicaid.
2. First-party trusts, sometimes called d(4)(A) trusts, are funded with the disabled person’s own assets. This comes up most often when someone receives a personal injury settlement or an unexpected inheritance they cannot simply give away. The trust must be established before the beneficiary turns 65, and it must include a Medicaid payback provision – meaning the state can claim reimbursement from remaining funds at death. Despite that restriction, a first-party trust is often the right tool because the alternative (spending down to qualify) can waste assets that could have improved the person’s quality of life.
3. Pooled trusts are managed by nonprofits, with each participant holding a separate sub-account within a larger investment pool. They cost less to administer than individual trusts, which makes them practical for smaller amounts. They are also available to people over 65, which first-party trusts are not. In Florida, pooled trusts may also serve as a substitute for a qualified income trust when a Medicaid applicant has both an income and an asset problem.

Who should consider a special needs trust in Florida?

Any family with a member who has a significant disability – and who receives or may one day receive SSI or Medicaid – should think about this. That includes parents planning their estates, grandparents who want to leave something behind, siblings named as future caregivers, and individuals with disabilities who are expecting a settlement or inheritance.

It also includes families who assume they have time. A special needs trust only protects assets that flow into it. A will that leaves money directly to a disabled beneficiary, or a life insurance policy with that person named outright, can undo the plan the moment it is executed. Getting the structure right before anything happens is the whole point.

What a special needs trust can pay for

The trustee has broad discretion to spend trust funds on anything that supplements the beneficiary’s government benefits without replacing them. Common uses include private therapy not covered by Medicaid, transportation and vehicle costs, medical and dental care beyond what insurance covers, education, assistive technology, home modifications, recreational activities, and personal care items.

The key is that the beneficiary cannot demand funds from the trustee and cannot control the account. The moment a beneficiary has direct access to trust funds – say, through a linked debit card – those funds become countable assets and can cost them their benefits.

A recent change worth knowing: the food rule

Until late 2024, trustees had to be careful about paying for groceries or restaurant meals. Under the old SSA rules, food counted as in-kind support and maintenance (ISM), which could reduce an SSI recipient’s monthly check. That rule changed as of September 30, 2024. Food is no longer counted as ISM. A trust can now pay for groceries, dining out, or food for outings without any effect on SSI.

Housing is a different story. Rent, mortgage payments, and utilities still count as ISM and can reduce an SSI check by up to roughly $351 per month. Paying for housing through a trust can still be the right choice – a smaller SSI check may be worth it if it means the beneficiary lives somewhere safe and appropriate – but the tradeoff should be weighed carefully.

How a special needs trust compares to an ABLE account

These two tools serve related but different purposes. An ABLE account is simpler and cheaper to open, with no attorney required. But ABLE accounts have an annual contribution limit ($20,000 in 2026), and balances over $100,000 can affect SSI. A special needs trust has no contribution cap and no SSI balance limit.

Many families use both. The trust holds larger assets and provides long-term structure. The ABLE account handles day-to-day spending with more flexibility. In Florida, there is an additional reason to use both: Florida abolished Medicaid recovery from ABLE accounts in 2019. Rolling funds from a first-party trust into an ABLE United account each year – up to the annual contribution limit – can reduce what the state recovers at death.

For more on ABLE accounts, see our post on what an ABLE account is and how the rules changed in 2026.

Setting up a special needs trust in Florida

A trust that is drafted incorrectly can disqualify a beneficiary from the very benefits it was meant to protect. The language matters. The trustee selection matters. The funding matters. An estate plan that does not account for a family member’s disability – or that leaves assets directly to that person – can undo years of careful planning in a single bequest.

If your family includes someone with a disability, special needs planning should be part of any conversation about wills, trusts, life insurance, or long-term care. Our attorneys work with families across Tallahassee and the surrounding area on special needs planning that keeps benefits intact while providing for the people who need it most.