For many grandparents, leaving an inheritance to their grandchildren is an important part of their estate plan. When a grandchild has special needs, that desire to provide long-term financial security can be even stronger.
But how an inheritance is left can be just as important as how much is left.
If a grandchild receives means-tested government benefits such as Supplemental Security Income (SSI), an inheritance left directly to them could affect their eligibility. With proper special needs estate planning, grandparents can provide meaningful financial support while coordinating their gift with the family’s broader plan.
Why a Direct Inheritance Can Create Problems
Leaving money directly to a grandchild may seem like the simplest option, but it can create complications if the grandchild receives SSI or other means-tested benefits.
SSI generally limits an individual’s countable resources to $2,000 in 2026. Assets such as cash, bank accounts, stocks, and mutual funds may count toward that limit.
For example, suppose grandparents have three grandchildren and want to leave each of them $100,000. If one grandchild receives SSI, leaving $100,000 directly to that grandchild could affect their benefits.
That doesn’t mean grandparents need to leave the grandchild out of their estate plan. It may simply mean structuring that inheritance differently.
Using a Third-Party Special Needs Trust
One potential solution is a third-party special needs trust.
A third-party special needs trust is funded with assets belonging to someone other than the individual with a disability, such as a parent or grandparent. Instead of leaving an inheritance directly to the grandchild, grandparents can direct the assets to a properly drafted trust for the grandchild’s benefit.
A trustee manages the assets and makes distributions according to the trust’s terms. Because the rules surrounding special needs trusts and government benefits can be complicated, the trust should be drafted by an attorney experienced in special needs planning and coordinated with the family’s financial plan.
Don’t Forget Beneficiary Designations
Creating a special needs trust is only part of the process.
Grandparents should also review how their assets will pass at death, including beneficiary designations on:
- IRAs and other retirement accounts
- Life insurance
- Annuities
- Investment and financial accounts
A family could have a properly drafted special needs trust and still accidentally leave an IRA or life insurance benefit directly to the grandchild.
That’s why beneficiary designations and special needs trusts should be reviewed together as part of the estate planning process.
How an ABLE Account Can Fit Into the Plan
An ABLE account may also play an important role.
ABLE accounts are tax-advantaged accounts for eligible individuals with disabilities. Beginning in 2026, eligibility expanded to people whose disability began before age 46.
Funds can be used for qualified disability expenses such as housing, transportation, education, healthcare, assistive technology, and other expenses related to the individual’s health, independence, or quality of life.
ABLE accounts also receive favorable treatment under SSI rules. Generally, up to $100,000 held in an ABLE account is excluded from SSI’s countable resource calculation.
For some families, an ABLE account and a third-party special needs trust can work together rather than serving as an either/or choice.
Fair Doesn’t Always Mean Equal
Special needs planning can also raise a more personal question: Should every grandchild receive the same inheritance?
There is no single right answer.
Some grandparents may want each grandchild to receive the same amount but structure the inheritance differently for a grandchild with special needs. Others may decide that providing additional resources to a grandchild with significant lifelong support needs better reflects their family’s goals.
Fair and equal aren’t always the same thing.
Make Special Needs Planning a Family Conversation
Perhaps the most important part of planning for a grandchild with special needs is coordination.
The child’s parents may already have a special needs trust, ABLE account, estate plan, and long-term financial strategy in place. Before grandparents change their own estate plans, they should understand:
- Whether a special needs trust already exists
- Whether grandparents can leave assets to that trust
- Who will serve as trustee
- How beneficiary designations should be structured
- How their estate plan fits with the parents’ plan
- What additional financial resources the grandchild may need over time
Sometimes the answer isn’t another trust or account. It’s simply making sure everyone is working from the same plan.
Creating a Coordinated Plan for the Next Generation
Grandparents can play an important role in the long-term financial security of a grandchild with special needs.
The goal isn’t to discourage grandparents from leaving an inheritance. It’s to make sure their generosity accomplishes what they intended.
A third-party special needs trust, ABLE account, coordinated beneficiary designations, and comprehensive estate and financial plan can all play a role. By coordinating these decisions with the child’s parents and appropriate legal and financial professionals, grandparents can help provide meaningful long-term support while protecting the planning already in place.
