For parents and guardians of children with disabilities, financial planning is an essential part of their care. While every family is different, here are four steps to consider as you put a plan in place that provides your child with access to resources and support throughout their life.
4 Financial Steps to Consider for Families of Children With Disabilities
Early planning can help ensure your child gets access to the resources they need.
Key Takeaways
- Establishing a special needs trust can help you safeguard assets meant for your child without disqualifying them from governmental aid.
- Creating an ABLE account can offer a tax-advantaged way to save for your child’s qualifying needs, like food, housing and legal fees.
- Having a Last Will and Testament can help ensure your assets are distributed according to your wishes, including naming the special needs trust as a beneficiary.
-
1Establish a Special Needs Trust and Choose a Trustee
Well-meaning friends and relatives may wish to contribute to your child’s care, but it’s important to know that if he or she accumulates too many assets, it may jeopardize eligibility for certain governmental benefits. For example, if your child has more than $2,000 in assets, they could become ineligible for federal benefits such as Medicaid, Social Security and Supplemental Security Income.1
Another factor to consider are life insurance payments, inheritance or financial gifts your child may receive by family or friends that could push their assets above $2,000. To avoid this, consider creating a special needs trust. You can name the trust as the beneficiary instead of your child, helping to preserve your child’s eligibility for federal aid. Assets in a special needs trust do not count against your child’s eligibility for public assistance benefits.
-
2Create an ABLE Account
Similar to 529 education savings accounts, ABLE (Achieving a Better Life Experience) accounts provide a tax-advantaged way to invest towards the cost of care for your child with a qualifying disability, known as an Eligible Individual. ABLE accounts can be used for people whose qualifying disability began before the age of 26, and can be used to pay for costs relating to education, food, housing, assistive technology, legal fees and other expenses. The disability onset age will expand to 46 years old on January 1, 2026.2
While contributions to an ABLE account are not eligible for a federal income tax deduction, the earnings within an ABLE account can potentially grow on a tax deferred basis. In addition, distributions of earnings are not taxed if the money is used for the Eligible Individual’s qualified disability expenses.
For 2025, you can contribute up to $19,000 to an Eligible Individual’s ABLE account. It’s important to note that assets in an ABLE account generally do not affect your child’s eligibility for Social Security benefits, unless the ABLE account balance exceeds $100,000.3
-
3Designate a Guardian
While it might be tough to imagine a day when you are no longer your child’s guardian, appointing someone to step into that role should you pass away, or otherwise become unable to manage the responsibility, can provide an important layer of protection. This is, of course, a major decision and you should ensure that the person you choose is fully informed about your child’s unique circumstances and ready to take on everything the role entails.
One way to help set your designated guardian up for success is creating a letter of intent that outlines your child’s current medications, doctors, therapists, likes and dislikes. While this is not a formal legal document, having a record of your child’s needs can help their guardian transition into the role.
-
4Draft a Last Will and Testament (a “Will”)
Most people need a Will, but it becomes an even higher priority if you have a family member with disabilities. Anything can happen at any time, and a will documents your final wishes and outlines how your assets will be distributed after you pass away. You will have an opportunity to name a guardian for any minor child in your Will. An estate attorney has the specialized skills to help you draft a Will.
In addition, if you do not have a Will before passing, the division of your assets may be left to probate courts. In this case, a probate judge could allocate more than $2,000 worth of assets to your child, which may disqualify your child from federal aid.
Working With a Financial Advisor
Making decisions to help ensure your child has a financially secure future can be emotionally and financially challenging. Fortunately, you don’t have to navigate it alone. A Morgan Stanley Financial Advisor who specializes in special needs planning can offer guidance and suggestions on the steps you can take to help meet your goals.
1 Social Security Administration, Understanding Supplemental Security Income SSI Resources -- 2025 Edition, Accessed July 31, 2025
2 ABLE National Resource Center, About ABLE Accounts, Accessed July 31, 2025.
3 Certain Eligible Individual who owns an ABLE account may be able to make an additional contribution of an amount up to the lesser of (a) the Eligible Individual’s compensation from employment for the tax year or (b) the federal poverty line for a one-person household for the previous year based on the legal residence of the Eligible Individual.
Disclosures:
This material has been prepared for educational purposes only. It does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it.
Morgan Stanley Smith Barney LLC does not accept appointments nor will it act as a trustee but it will provide access to trust services through an appropriate third-party corporate trustee.
Morgan Stanley Smith Barney LLC is not implying an affiliation, sponsorship, endorsement with/of the third party or that any monitoring is being done by Morgan Stanley Smith Barney LLC ("Morgan Stanley") of any information contained within the website. Morgan Stanley is not responsible for the information contained on the third-party website or the use of or inability to use such site. Nor do we guarantee their accuracy or completeness.
Insurance products are offered in conjunction with Morgan Stanley Smith Barney LLC’s licensed insurance agency affiliates.
The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives. Investors should consider many factors before deciding which 529A program is appropriate. Some of these factors include: the 529A program’s investment options and the historical investment performance of these options, the program’s flexibility and features, the reputation and expertise of the program's investment manager, the program’s contribution limits and the federal and state tax benefits associated with an investment in the program. Some states, for example, may offer favorable tax treatment and other benefits to their residents only if they invest in the state’s own 529A Qualified ABLE Program. Investors should determine their home state’s tax treatment of 529A programs when considering whether to choose an in-state or out-of-state plan. Investors should consult with their tax or legal advisor before investing in any 529A program or contact their state tax division for more information.
Before investing in any 529A program, investors should review the 529A program’s materials for more information on investment options, risk factors, fees and expenses and possible tax consequences.
Investments are subject to market risk and may fluctuate in value. Before investing, investors should consider whether tax or other benefits are only available for investments in the investor’s home-state 529A program. Non-qualified distributions of earnings will be subject to income tax and a 10% federal income tax penalty. State taxes may be applicable.
Morgan Stanley Smith Barney LLC (“Morgan Stanley”), its affiliates and Morgan Stanley Financial Advisors or Private Wealth Advisors do not provide tax or legal advice. This material was not intended or written to be used, and it cannot be used, for the purpose of avoiding tax penalties that may be imposed on the taxpayer. Clients should consult their tax advisor for matters involving taxation and tax planning and their attorney for matters involving trust and estate planning and other legal matters.
This material may provide the addresses of, or contain hyperlinks to, websites. Except to the extent to which the material refers to website material of Morgan Stanley Wealth Management, the firm has not reviewed the linked site. Equally, except to the extent to which the material refers to website material of Morgan Stanley Wealth Management, the firm takes no responsibility for, and makes no representations or warranties whatsoever as to, the data and information contained therein. Such address or hyperlink (including addresses or hyperlinks to website material of Morgan Stanley Wealth Management) is provided solely for your convenience and information and the content of the linked site does not in any way form part of this document. Accessing such website or following such link through the material or the website of the firm shall be at your own risk, and we shall have no liability arising out of, or in connection with, any such referenced website. Morgan Stanley Wealth Management is a business of Morgan Stanley Smith Barney LLC.
© 2025 Morgan Stanley Smith Barney LLC. Member SIPC.
CRC# 4724503 (08/2025)