How to Protect a Loved One’s Future With a Special Needs Trust
A special needs trust is designed to hold assets for the benefit of an individual with a disability without affecting their eligibility for programs such as Medicaid and Supplemental Security Income (SSI).
Families want to provide support while preserving eligibility for critical public benefits. In South Carolina, one of the most effective legal tools for achieving that balance is the special needs trust.
At Porter Law Firm in Mount Pleasant, South Carolina, we believe that estate planning should reflect the specific needs of each family. When a loved one lives with a disability, planning for their financial future becomes a very personal and sensitive matter.
South Carolina law allows individuals to create and fund these trusts in ways that offer financial stability while protecting access to essential support systems. As we guide families through this process, we focus on legal clarity, flexibility, and the well-being of the person the trust is intended to support.
Why Standard Inheritance Can Create Problems
Many families first come to us after learning that a direct inheritance or financial gift could jeopardize a loved one’s public benefits. Under federal and South Carolina law, programs like Medicaid and SSI impose strict income and asset limits.
If someone with a disability receives money outright—through a will, a life insurance policy, or even a generous relative—it can disqualify them from receiving much-needed support. This can lead to devastating outcomes, including the loss of health care or housing assistance.
A special needs trust allows us to take a different approach. Instead of transferring assets directly to the person with a disability, we can place them in a legal trust that is managed by someone else, typically a parent, sibling, or trusted third party.
The assets in the trust can then be used to improve the person’s quality of life, covering expenses that government programs don’t address. This may include services such as personal care aides, therapies, education, transportation, and recreational activities.
By structuring assets in this way, a special needs trust enables families to provide lasting support without jeopardizing public benefits. It's a strategic solution that meets legal requirements while reflecting the love and responsibility families feel for their most vulnerable members.
South Carolina Law on Special Needs Trusts
South Carolina law recognizes and supports the use of special needs trusts, particularly when structured to comply with federal regulations under 42 U.S. Code § 1396p(d)(4).
There are two main types of trusts we help clients consider:
The first-party trust, which uses the beneficiary’s own assets (often from a lawsuit settlement or inheritance), and
a third-party trust—which uses assets from someone else, like a parent or grandparent.
Both types of special needs trusts must meet certain requirements to protect the beneficiary’s eligibility for benefits. For example, the trust must be properly drafted, irrevocable in most cases, and include specific language about how the funds can and can't be used.
For first-party trusts, South Carolina requires that the trust be established before the beneficiary turns 65, and the state must be reimbursed for Medicaid expenditures upon the beneficiary’s death.
These details matter. When we prepare a special needs trust, we tailor it to fit the exact circumstances of the beneficiary and their family.
We take into account the source of the funds, the age and needs of the beneficiary, and the future goals of those providing the support. Through careful drafting and thoughtful planning, we help families meet both their financial and emotional goals.
Choosing the Right Trustee
The person who manages a special needs trust, known as the trustee, plays a central role in how the trust functions.
South Carolina law gives the trustee the authority to make distributions for the benefit of the person with a disability, but the trustee must also follow strict guidelines to maintain eligibility for public programs. Choosing the right trustee is just as important as writing the trust correctly.
We often counsel clients to think carefully about who has the patience, integrity, and financial responsibility to serve in this role. In some cases, a family member is the best choice.
In others, it makes more sense to appoint a professional trustee or financial institution with experience in administering special needs trusts. The trustee must understand what types of expenses are permitted and how to keep detailed records for benefit agencies.
A trustee must never give money directly to the beneficiary, since that could be counted as income and affect benefits. Instead, the trustee can pay service providers or vendors directly for goods and services that improve the beneficiary’s life.
We provide ongoing legal guidance to trustees so they feel confident in their decisions and understand their responsibilities under South Carolina law.
Integrating the Trust Into Broader Estate Planning
When we design an estate plan that includes a special needs trust, we look at how all the pieces work together. Wills, beneficiary designations, life insurance policies, and retirement accounts must be reviewed and coordinated.
If any of these assets are directed to the person with a disability outside of the trust, it could undermine everything the trust is intended to do.
At Porter Law Firm, we help clients restructure their estate plans to direct assets into the special needs trust instead of to the beneficiary directly.
We also discuss how other family members, such as grandparents or siblings, can contribute to the trust through their own estate planning. By centralizing support in this way, families can provide a long-term safety net without the risk of disqualifying someone from benefits.
We also explore alternatives and supplements, such as ABLE accounts, which can provide additional flexibility for smaller contributions. Still, for significant assets or long-term support needs, a special needs trust remains the most secure and reliable option under South Carolina law.
Planning for the Future
One of the most meaningful aspects of a special needs trust is the peace of mind it offers. Parents often ask us, “What will happen to my child when I’m gone?”
A properly drafted and funded special needs trust answers that question with confidence. It provides structure, protection, and continuity—qualities that become even more important when a loved one can't advocate for themselves.
We talk with families about how to fund the trust during their lifetimes and how to provide for it after they’re gone.
Life insurance is a common funding vehicle, particularly for families who want to make sure resources will be available long after they pass. Others choose to use property, investment accounts, or savings to create a trust that reflects their values and priorities.
Naming a successor trustee and providing written guidance can also strengthen the trust’s effectiveness.
Although the trust itself defines legal authority, personal letters of intent can help future trustees understand the beneficiary’s personality, preferences, and needs. We encourage families to think holistically about what they want their legacy to provide.
Legal Support Beyond the Initial Setup
Setting up a special needs trust isn't a one-time task. As laws evolve and the beneficiary’s situation changes, the trust may require updates or ongoing administration. We remain available to help families make adjustments, respond to legal developments, and keep the trust functioning as intended.
In South Carolina, certain court approvals may be required in specific cases, particularly with first-party trusts or trusts created for minors. We guide clients through these proceedings and help them avoid pitfalls.
Whether the trust needs to be amended, restated, or funded with new assets, we stand ready to provide support throughout the years.
We also review trusts periodically to make sure they still align with benefit program rules. This ongoing relationship is part of how we help families protect what matters most. A special needs trust is a powerful legal instrument, but its success depends on thoughtful planning and responsible administration.
Contact an Estate Planning Attorney
At Porter Law Firm, we’ve seen how these trusts bring peace to families and dignity to those they support. We're proud to serve Mount Pleasant, Charleston, Summerville, and Hilton Head, South Carolina. Contact us today to schedule a consultation.
