Many parents of a child with special needs feel proud they finally signed a will or trust, then later discover that one small drafting choice or beneficiary form could cost their child SSI or Medicaid overnight. That realization can feel like the rug has been pulled out from under your planning. You did what you were told you were supposed to do, yet you are hearing that your documents might actually hurt the person you are trying so hard to protect.
For families in New York, especially on Long Island where the cost of care and housing is high, public benefits often pay for essential services that private savings alone cannot cover. Losing or interrupting those benefits because of a paperwork mistake is every caregiver’s nightmare. Understanding how these programs look at assets, how common estate planning tools really work, and where well‑meaning special needs plans tend to go wrong can help you protect your loved one more effectively.
At Adler Law, we regularly review New York estate plans for children and adults with special needs and find hidden issues that could jeopardize SSI and Medicaid. As a boutique estate planning and probate firm, we focus on building coordinated plans that use wills, trusts, and asset protection strategies to safeguard families’ futures. In this article, we will walk through the mistakes we see most often in special needs planning and how you can avoid them before they cause problems for your loved one.
Why Well‑Meaning Special Needs Plans Go Wrong
Many families assume that having any will or trust automatically protects a loved one with special needs. SSI and Medicaid are means‑tested programs. Benefit agencies look at the beneficiary’s income and what they own when deciding whether they qualify. Even a modest amount of money in the beneficiary’s own name can be treated as a countable resource that puts them over the allowed limit.
A typical estate plan for children without disabilities might say that assets are distributed outright to each child at certain ages, or that children receive equal shares with no strings attached. For a child who depends on SSI or Medicaid in New York, that kind of standard language can be harmful. An inheritance that would be perfectly appropriate for a sibling can, for the child with special needs, trigger a suspension of benefits, new reporting requirements, and a scramble to fix things after the fact.
The core problem is not that families are careless. It is that many common planning documents are not built for the unique rules that apply to someone receiving means‑tested benefits. Over more than 50 years of combined professional experience with estate planning and probate, we have seen the same patterns repeatedly. The plan looks fine at first glance, but when you align it with benefit rules, it quietly fails the person it was supposed to protect.
Once you recognize that disconnect, you can focus on the specific decisions that tend to cause trouble, such as who is named to inherit, what kind of trust language is used, who serves as trustee, and how assets like a Long Island home or life insurance policy are actually set up to pass at death.
Mistake 1: Leaving Money Directly To Your Loved One
One of the most common mistakes we see is leaving assets directly to the person with special needs. This can happen in several ways. The will might name them as a beneficiary of a share of the estate. Their name might be on a joint bank account with a parent. They might be the listed beneficiary on a life insurance policy, IRA, or brokerage account. On paper, these are all acts of love. For SSI or Medicaid, they are countable resources sitting in the beneficiary’s name.
Imagine a parent in Nassau County who leaves a life insurance policy directly to an adult child who receives SSI and relies on Medicaid for services. When the parent dies, those funds are paid to the child. From the agency’s perspective, that is now money the child owns. The balance can push them above the resource limit. Benefits may be suspended until the money is spent down or transferred into a different type of trust, which is often less flexible and more complicated to set up after the fact.
This issue is not limited to large inheritances. Smaller amounts can still cause months of disruption while paperwork is sorted out. It also applies to payable on death or transfer on death designations that families sometimes use to avoid probate in New York. Those accounts bypass the will entirely and flow directly to the named beneficiary, which means they can undermine a carefully drafted trust if they are not aligned.
Another frequent problem is well‑intentioned gifts from grandparents or other relatives. A grandparent might open a bank account or 529 plan in the child’s name, or include them directly in their own will. If everyone is not on the same page, those separate gifts can undo the parents’ planning. When we review special needs plans at Adler Law, we pay close attention not just to the parents’ documents but also to beneficiary designations and other accounts that may quietly funnel assets into the beneficiary’s name.
A safer approach, in many cases, is to direct inheritances and beneficiary designations to a properly structured third‑party special needs trust instead of to the individual. That way, funds can enhance quality of life without being treated as countable resources in the same way as direct ownership.
Mistake 2: Using A Generic Trust Instead Of A True Special Needs Trust
Another frequent pitfall is assuming that any trust will protect benefits. Families may already have a revocable living trust or a simple trust in their will and think they are covered. The challenge is that a generic trust often contains terms that conflict with SSI and Medicaid rules. The trust language might require the trustee to distribute income or principal to the beneficiary at certain ages, or give the beneficiary the right to withdraw funds, which can make the assets available for benefit purposes.
A third‑party special needs trust, by contrast, is designed so that the trustee has discretion over when and how to make distributions. The beneficiary does not have the right to demand money. The trust can pay for many goods and services that improve quality of life, but it does so in a way that is meant to work alongside means‑tested benefits. There is no single required form, but there are clear concepts that need to be built into the document for it to function as intended.
Common drafting patterns that cause problems include standard clauses that say income must be paid out annually, or that the beneficiary receives the remaining trust funds outright at a certain age. Even language that seems protective, such as allowing the beneficiary to act as co‑trustee, can create complications if it gives them too much control over distributions. Benefit agencies look at both the wording and the practical reality when deciding whether trust assets are considered available.
At Adler Law, we review many New York trusts that were never tailored to a special needs situation. On paper, they look like solid living trusts for probate avoidance. In practice, their distribution terms can put SSI or Medicaid at risk if used for a beneficiary with disabilities. Our role as a boutique estate planning and probate firm is to help families distinguish between a standard trust that may work for some heirs and a true special needs trust that is intended to support, not replace, public benefits.
For many families, the solution is to include a dedicated third‑party special needs trust within the overall estate plan. Assets that would otherwise go directly to the individual can be directed into that trust instead, with language that gives the trustee the flexibility to supplement benefits while reducing the risk of avoidable problems.
Mistake 3: Choosing The Wrong Trustee Or Giving Them No Guidance
Even a well‑drafted special needs trust can fail in practice if the wrong trustee is chosen or if the trustee is left without guidance. Families often default to naming the oldest sibling or a close relative, assuming that familiarity equals suitability. That person might care deeply about the beneficiary but be overwhelmed by the legal and financial responsibilities involved, especially when they are also grieving a loss.
A special needs trustee is responsible for investing and managing trust assets, making thoughtful decisions about when to spend money and when to preserve it, and keeping records that can withstand questions from benefit agencies. They should understand, at least at a practical level, which types of distributions might be treated as income and how to structure payments so they support the beneficiary without unnecessarily disrupting benefits. That is a lot to ask of someone who has never served in that role before.
Conflicts can also arise among siblings or other relatives. One family member might feel the trustee is being too strict or too generous. The trustee might be so worried about doing the wrong thing that they avoid making distributions that would genuinely improve the beneficiary’s life. Without clear instructions and ongoing advice, relationships can become strained and the beneficiary may not get the full benefit of the trust that was set up for them.
Combining careful trustee selection with clear written guidance makes a significant difference. This might include a separate letter of intent that describes the beneficiary’s needs and preferences, as well as specific examples in the trust document of acceptable uses of funds. Some families consider naming a professional or corporate trustee, or pairing a professional trustee with a family member in some role, so that emotional insight and technical administration can complement each other.
At Adler Law, clients work directly with an attorney, not just with staff, when making these decisions. That allows us to take the time to understand family dynamics on Long Island and in the rest of New York, talk candidly about who is really equipped to serve, and walk through options. The goal is not simply to fill in a blank on a form, but to choose a trustee structure that is likely to work over the long term for your specific loved one and family.
Mistake 4: Forgetting To Fund Or Coordinate The Special Needs Trust
A special needs trust that exists only on paper will not protect anyone. Another common mistake is signing a well‑drafted trust but never actually funding it, or failing to coordinate the rest of the estate plan with it. The will might still leave assets outright to children, existing beneficiary forms may point to the individual, and real estate deeds might remain in individual names without any direction about how those properties should flow.
Funding a special needs trust usually involves two broad steps. First, the estate plan needs to say that a share of the parents’ assets will flow into the trust at death, often through the will or a revocable living trust. Second, specific assets such as life insurance policies, retirement accounts, and investment accounts may need updated beneficiary designations so that they point to the special needs trust instead of directly to the individual.
Real estate requires particular attention for many New York families. A Long Island home may be both a valuable asset and a critical part of the beneficiary’s living arrangement. Planning has to address whether the house will be sold, held in trust, or transferred in some other way, and how that interacts with benefit rules. Business interests and rental properties raise similar coordination questions. Without clear instructions, the default legal path for these assets might not match what the family envisioned.
Unfunded or mis‑funded trusts create a false sense of security. Parents walk away from a signing meeting feeling the special needs trust is in place, but when they pass away, accounts and properties pour into the wrong hands or bypass the trust entirely. Correcting this later can involve court proceedings or rushed transfers that may not achieve the same result.
Because Adler Law’s founding attorney holds additional licenses in real estate and insurance, we are able to look beyond the documents and into the underlying assets. In practice, that means reviewing deeds, insurance policies, and business structures with you to help ensure they line up with the special needs trust. Our integrated practice areas, which include estate planning, probate, real estate, and related business law, allow us to address these coordination issues within a single, coherent plan.
Mistake 5: Ignoring Future Care Needs And Family Dynamics
Legal documents alone do not tell the whole story of your loved one’s future. Another mistake we see is focusing solely on wills and trusts while leaving out the practical care plan and family communication that make those documents effective. Parents often assume that siblings or other relatives just know what to do, because they have watched the day‑to‑day routines for years. Once parents are gone, those routines can be hard to replicate without clear guidance.
A letter of intent or care plan can bridge this gap. It is not a legal document in the same sense as a will, but it describes everyday details that matter deeply to the person with special needs. This might include preferred morning and bedtime routines, food preferences, communication methods, medical providers, medication schedules, triggers to avoid, and favorite activities. It can also list important contacts at schools, service agencies, and local programs in New York that have been helpful.
Future housing and decision‑making also need attention. Will your loved one continue living in the family home, move to a supported apartment, or live with a sibling? Who is prepared to step in as guardian or decision‑making supporter, and have those expectations been discussed openly? If the plan assumes a sibling will provide care, do the financial and legal arrangements, including the special needs trust, actually support that expectation in a realistic way?
Ignoring these questions can leave even a technically sound special needs trust underused. Trustees and caregivers may hesitate because they are unsure what the parents would have wanted, or they may disagree on priorities. At Adler Law, our emphasis on long‑term relationships and treating clients as individuals means we encourage families to talk through these issues, not just sign documents. We often suggest updating care instructions as circumstances change, so that the plan evolves along with your loved one’s needs.
How To Review Your Current Plan For Hidden Special Needs Planning Mistakes
If you already have a will or trust, the goal is not to start from scratch. Instead, you can take a focused look at where hidden mistakes often hide. Begin by gathering your current will, any trusts, and recent statements for bank, investment, and retirement accounts, along with life insurance policies. Review who is named to inherit and who is listed as beneficiary on each account. If your loved one with special needs is named directly anywhere, that is a sign the plan may need attention.
Next, read through the distribution terms in your will or trust. Look for language that talks about assets passing outright to children or being distributed at certain ages. If there is a trust for your loved one, check whether it is clearly described as a supplemental or special needs trust with discretionary distributions, or whether it looks more like a standard trust with mandatory payouts.
It also helps to speak with grandparents and other relatives who intend to leave gifts. Ask how they have set up their own wills, trusts, and accounts. Many are relieved to learn about a family special needs trust they can name instead of leaving assets directly to the individual. A coordinated family approach can prevent one person’s separate planning from undermining everyone else’s efforts.
Certain life events are good triggers for a professional review. These include a new diagnosis, a child approaching adulthood, significant changes in health, a home purchase or sale in New York, marriage or divorce, or major changes in savings or retirement planning. At Adler Law, we invite families to sit down with an attorney for a structured review of their documents, assets, and goals. Together, we look for the kinds of mistakes described in this article and work to create a plan to address them before they affect benefits or care.
Protect Your Loved One’s Future With Coordinated Special Needs Planning
Special needs planning does not fail because parents or caregivers do not care enough. It usually fails because standard estate tools, beneficiary forms, and family expectations are not aligned with the realities of SSI, Medicaid, and long‑term care. Many of these problems can be identified and addressed now, while you still have time and options, rather than after a crisis forces rushed decisions.
If you recognize any of these patterns in your own plan, a focused review can bring clarity and peace of mind. At Adler Law, we work closely with New York families to coordinate wills, trusts, real estate, insurance, and business interests in a way that supports a loved one with special needs while reducing the risk of unintentionally putting essential benefits at risk. We welcome the opportunity to talk with you, answer your questions, and help you build a plan that reflects both your legal realities and your family’s values.
Call (516) 740-1184 to schedule a consultation with Adler Law.