In conjunction with setting up a trust, advisors say it's important to make sure that the assets you want to leave behind are not left outright to the person with special needs.
For instance, if you bequeath your individual retirement account outright to the individual, government assistance might be suspended until the situation is rectified. IRAs and other tax-advantaged retirement funds can be bequeathed to the trust, but there are potential unwanted tax consequences if not set up properly.
Make sure, too, that you understand the particulars of any life insurance policies you want to leave for the individual. Term life insurance, for example, comes with low premiums but will expire at the end of its term, which might not meet the needs of the beneficiary.
Walther said caretakers also should be aware of a relatively new way to fund expenses. Created in 2014, ABLE (Achieving a Better Life Experience) accounts are tax-advantaged savings accounts for people with disabilities.
In simple terms, after-tax contributions to the account can be made by anyone. Income earned in the account is tax-free, but the annual contribution limit is $14,000 regardless of the source, and the balance must remain below $100,000 to avoid losing any government benefits.