You want the best for your child. Your parents likely feel the same way about their grandchildren. Many grandparents in Illinois want to leave a financial legacy to help with future care.
However, a standard gift in a will can create an “inheritance trap.” If a child with a disability receives money directly, they may lose access to essential government benefits.
The risk of standard will language
Most people use simple language in their wills to treat grandchildren equally. While this seems fair, it can be a mistake for a child who relies on Supplemental Security Income (SSI) or Medicaid. In Illinois, having more than $2,000 in assets usually results in a loss of SSI.
While Illinois recently increased the Medicaid asset limit for those with disabilities to $17,500, the lower federal SSI limit still creates a significant hurdle. This means a $5,000 gift from a grandparent could still do more harm than good. You should explain to your family that direct gifts can trigger a “benefits cliff” where the child loses their monthly financial support.
Use a third-party special needs trust
A better way for grandparents to help is by using a third-party special needs trust. This legal tool holds assets for the child without counting as a personal resource.
Because the money comes from a grandparent and not the child, there is generally no requirement to pay back Medicaid from the trust after the child passes away. This allows the family to preserve wealth across generations.
Why avoiding disinheritance matters
Sometimes grandparents leave a child out of the will entirely to avoid benefit issues. They might leave the money to a sibling with the “understanding” that it will be used for the child with special needs. This is a risky move because that money is not legally protected from the sibling’s creditors or a divorce.
Consider an Illinois ABLE account
Grandparents who want to give smaller gifts may prefer an Illinois ABLE account. These accounts allow for tax-advantaged savings that do not count against benefit limits.
For 2026, a grandparent can contribute up to $20,000 to help with “quality of life” expenses. This provides the child with some financial independence for things like hobbies or electronics.
You should note that while the trust itself may avoid Medicaid payback, any remaining funds in an ABLE account could be subject to state recovery claims. This is if they exceed certain Illinois estate thresholds.
Seek professional guidance for your family plan
Every family has a unique dynamic that requires a specific approach. It is important to ensure that all generations are on the same page regarding your child’s future. An experienced attorney can review your specific situation to help you coordinate a plan that protects your loved one.
