Most estate plans start out with a goal that sounds relatively straightforward: leave the money to the people you love, and they will be better off for it. When one of those people has a disability, that goal can be not-so-simple to accomplish. An inheritance that arrives the wrong way can cost a beneficiary with a disability the very benefits that they need to pay for their housing, caregiving, medication, and day-to-day support.

The good news is that this is an entirely solvable problem, but only if the planning happens before the money moves. Below is a plain-English overview of how special needs planning works in Washington State, and the steps a family can take to get it right.

Why an Outright Gift Can Backfire

Two of the most important programs for disabled individuals in Washington State are Supplemental Security Income (SSI) and Apple Health (Washington's Medicaid program). Both are means-tested, which is to say eligibility depends on how few resources the person owns.

The numbers are sobering. In 2026, the maximum federal SSI payment is $994 per month for an individual. To qualify, the recipient generally cannot hold more than $2,000 in countable resources. This limit is set by a statute that has not changed (or adjusted for inflation) since 1989. Apple Health eligibility for many disabled adults is tied to that same standard.

So a well-meaning $50,000 bequest from a grandparent does not make the beneficiary $50,000 better off. It makes them ineligible. Benefits stop, the family spends the inheritance covering what Apple Health used to cover, and once the money is gone they reapply and start over, usually with a gap in coverage and a fair amount of paperwork in between.

For families connected to Washington's Developmental Disabilities Administration (DDA), the stakes are higher still, because many DDA-funded services like supported living, employment support and respite care, are linked to Medicaid eligibility.

Solutions That Don't Work

Before turning to what does work, it is worth naming the two shortcuts families most often consider.

Disinheriting the disabled beneficiary. This preserves benefits, but it also permanently gives up the chance to improve that person's quality of life.

Leaving the money to a sibling "to use for" the disabled beneficiary. This is the more common and more dangerous choice. Nothing legally obligates the sibling to spend it as intended. Worse, the money is now exposed to that sibling's divorce, creditors, bankruptcy, business failure, or untimely death. Families rarely intend to gamble a disabled person's future on a relative's marriage holding together, but that is the practical effect.

The Third-Party Special Needs Trust

The standard solution is a third-party special needs trust (also called a supplemental needs trust). "Third-party" simply means it is funded with someone else's money (a parent's, a grandparent's, an aunt's), never the beneficiary's own.

The concept is straightforward. The trust owns the assets. The beneficiary does not. A trustee holds discretion over distributions, and because the beneficiary cannot demand money from the trust, the assets are not treated as the beneficiary's countable resources. Benefits continue, and the trust pays for what benefits do not: dental and vision care, adapted equipment, a computer, travel, a companion, education, recreation, a better quality of life.

Three drafting points are essential, especially in Washington State:

-       The trustee's discretion must be genuine and absolute. A trust that directs a trustee to pay for support or maintenance can be treated as an available resource. The language has to give the trustee full discretion and make clear the trust supplements (not replaces) any public benefits for which the disabled beneficiary may be eligible.

-       The beneficiary cannot serve as trustee. Under Washington's Apple Health trust rules, if the beneficiary is trustee of a trust for their own benefit, the assets are deemed available to them for eligibility purposes. This is true whether the trust is revocable or irrevocable, first-party or third-party.

-       No Medicaid payback is required. This is the key advantage over a first-party trust. Because the assets were never the beneficiary's, whatever remains at their death can pass to siblings, other family, or charity as the family directs.

First-Party and Pooled Trusts: When the Money is Already Here

Sometimes assets end up in a disabled person's own name, such as a personal injury settlement, an inheritance nobody planned for, back-due Social Security, or a gift from a relative who was never told about the problem with people who are eligible for means-tested benefits receiving a significant gift or inheritance.

That money can often still be protected, but the rules are different. A first-party special needs trust under 42 U.S.C. § 1396p(d)(4)(A) can hold it, and the beneficiary keeps benefits. The trade-off is a mandatory Medicaid payback: at the beneficiary's death, the state must be reimbursed for medical assistance it paid before anything passes to family.

Washington families also have a well-established pooled trust option under § 1396p(d)(4)(C): the Developmental Disabilities Endowment Trust Fund (DDETF), created by the Washington Legislature in 1999 and administered by The Arc of Washington State. Individual accounts are managed separately but invested together, which makes professional administration affordable for smaller amounts. Enrollment requires that the beneficiary live in Washington, meet the state's definition of developmental disability as determined by DDA, and be under age 65. The DDETF is a practical fit for families whose funding is modest, or who have no obvious individual to serve as trustee.

ABLE Accounts: A Useful Complement, Not a Substitute

The Washington State ABLE Savings Plan lets a disabled individual hold savings in their own name without those funds counting against benefit limits. For 2026, the annual contribution limit is $20,000, with additional room for beneficiaries who work and are not covered by an employer retirement plan.

Two 2026 developments are worth knowing. First, the ABLE Age Adjustment Act took effect January 1, 2026, raising the age-of-onset requirement from before age 26 to before age 46. This update means that a substantial number of Washingtonians who were previously ineligible now qualify. Second, ABLE remains subject to a balance ceiling for SSI purposes: amounts above $100,000 begin to count as a resource.

ABLE accounts are excellent for the beneficiary's own everyday spending and modest savings. They are not designed to hold an inheritance. Most well-built plans use both: an ABLE account for daily flexibility, a special needs trust for the larger long-term fund.

Decision-Making Authority After Age 18

Washington law changed meaningfully in 2022. Now, a court must find that less restrictive alternatives are insufficient before appointing a guardian for an adult.

That makes it worth considering the alternatives first:

-       Supported decision-making agreements. A supporter helps the individual gather information, understand options, and communicate decisions, without taking away the individual's legal right to decide. This type of agreement requires only two witnesses or a notary. No court filing is needed.

-       Powers of attorney and healthcare directives, where the individual has capacity to sign them.

Whatever the choice, it is worth addressing before the beneficiary's eighteenth birthday. Parental authority ends at 18 regardless of a young person's actual capacity, and families are often surprised when a provider suddenly stops sharing information.

Practical Steps You Can Take Now to Protect Your Loved One's Future

1. Tell the whole family. Grandparents, siblings, and godparents need to know that gifts and bequests must be directed to the trust, rather than to the beneficiary. One unrevised will can undo an otherwise careful plan.
2. Check the beneficiary designations. Life insurance, retirement accounts, and payable-on-death accounts pass outside the will. If any of them name the disabled beneficiary directly, the trust never sees the money.
3. Choose a trustee thoughtfully. The role blends investment judgment, benefits literacy, and long-term commitment. A sibling paired with a professional or corporate co-trustee is a common and durable arrangement.
4. Review the plan periodically. Benefit rules, dollar limits, and family circumstances all shift from time to time as the laws change.

A Note on Timing

Special needs planning rewards families who start early and punishes those who wait. A trust drafted before a settlement arrives is straightforward; one drafted afterward carries a Medicaid payback the family may never recover from. A conversation with relatives before a will is signed costs nothing; discovering the problem later on can cost a lot.

If you have a child or other beneficiary with a disability, the planning is worth doing properly, and it is worth doing now.

If you are seeking assistance with estate planning, probate, adoption, real estate transactions, or business legal questions, please don't hesitate to reach out to the experienced team at Limitless Law PLLC.
 

Call 360-685-0145 or click here to learn more.