Special-Needs Trusts and Benefits Planning in North Carolina

What Is a Special-Needs Trust?

A special-needs trust (SNT) is a legal tool designed to hold assets for a person with a disability without counting those assets toward eligibility for need-based public benefits like Supplemental Security Income (SSI) or Medicaid. In North Carolina, these trusts are especially valuable for families raising a child with autism because they allow you to set aside money for therapies, equipment, and other supports that improve quality of life - all while preserving the child's access to vital services.

Types of Special-Needs Trusts in North Carolina

There are three main types of SNTs used in North Carolina:

• First-party trust (self-settled): Funded with the child's own assets, such as an inheritance or settlement. After the child passes, any remaining funds must repay Medicaid. This trust can only be created by a parent, grandparent, legal guardian, or a court.
• Third-party trust: Funded by someone other than the child, typically parents or relatives. There is no Medicaid payback requirement, and leftover funds can go to other beneficiaries.
• Pooled trust: Run by a nonprofit organization that pools resources from many families to manage smaller accounts. Each beneficiary has a separate account within the trust. Pooled trusts are often more affordable and can serve as a stopgap if a family cannot afford an individualized trust.

Choosing the right trust depends on whose money is being used and what your long-term goals are. A skilled elder law or special-needs attorney in North Carolina can guide you through the options.

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Why Special-Needs Trusts Matter for Families in North Carolina

Many families in North Carolina rely on public benefits to help cover the cost of care for a child with autism. Medicaid, for instance, covers a range of medical and therapeutic services, including applied behavior analysis (ABA) therapy under certain circumstances. But these programs have strict income and asset limits. Having too much money in your child's name - even a modest inheritance or settlement - can disqualify them from SSI or Medicaid.

A properly drafted special-needs trust solves this by keeping those assets out of the child's countable estate. That means you can fund the trust with savings, gifts, or life insurance proceeds, and the money can be used for "supplemental" needs like:

• Private ABA therapy sessions that go beyond what Medicaid covers
• Speech and occupational therapy
• Specialized equipment, communication devices, or sensory tools
• Recreational activities, camps, and transportation
• Case management or advocacy services

By protecting benefit eligibility, you ensure your child continues to receive essential services like those offered through the NC Innovations Waiver or Early and Periodic Screening, Diagnostic and Treatment (EPSDT) program. And because Nearby ABA Therapy is a free matching service, we can help you find vetted BCBA-led providers who accept insurance and Medicaid, making it easier to put your trust funds to work.

Benefits Planning: Beyond the Trust

Understanding SSI and Medicaid in North Carolina

SSI provides a modest monthly cash payment to individuals with disabilities who have limited income and resources. As of 2025, the federal resource limit is $2,000 for an individual and $3,000 for a couple. North Carolina Medicaid also has resource limits, though some waivers have different rules. If your child has no income or assets above these limits, they may qualify for both SSI and Medicaid automatically. A special-needs trust lets you hold more than that limit without triggering disqualification.

It's important to know that SSI considers any distribution from the trust as "unearned income" if it goes directly to the child. But if the trust pays a third party (like a therapy provider) for goods or services, it generally does not count as income. This is a key reason to work with a knowledgeable attorney and trustee.

NC Innovations Waiver and Other Waivers

North Carolina offers home- and community-based 1915(c) waivers, including the NC Innovations Waiver for individuals with intellectual and developmental disabilities. This waiver provides funding for respite, day supports, and therapies that can complement ABA therapy. The waiver also has an asset limit, but special-needs trusts can hold resources above that limit. A trust can pay for services not covered by the waiver, such as summer camp or transportation to therapy sessions.

ABLE Accounts vs. Special-Needs Trusts

ABLEToday accounts, created under the federal ABLE Act, are another tool for saving without losing benefits. In North Carolina, the ABLE account is administered by the State Treasurer. Contributions up to $17,000 per year (as of 2025) do not count as assets for SSI or Medicaid, though the first $100,000 in an ABLE account is exempt from SSI's resource limit. However, ABLE accounts have fewer investment options and cannot hold more than the state limit. Many families use both: an ABLE account for small, everyday expenses and a special-needs trust for larger amounts or to avoid payback issues. A financial planner or special-needs attorney can help you decide the right mix.

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How to Set Up a Special-Needs Trust in North Carolina

Creating a special-needs trust typically involves these steps:

1. Consult an experienced attorney - Look for one who specializes in special-needs planning in North Carolina. The National Academy of Elder Law Attorneys (NAELA) has a member directory.
2. Choose the trust type - Based on who is funding the trust and your goals.
3. Draft the trust document - The attorney will include specific language required by North Carolina law to ensure the trust is "supplemental" and not counted as an available resource.
4. Select a trustee - This could be a family member, a professional trustee, or a pool trust provider. The trustee will manage distributions and file tax returns.
5. Fund the trust - Transfer assets like cash, life insurance policies, or real estate into the trust. Make sure the funding method does not trigger a lapse in benefits.
6. Coordinate with benefits - Update the trust document if your child's benefits change. Notify the Social Security Administration and Medicaid that the trust exists.

Choosing a Trustee

The trustee has a fiduciary duty to manage the trust for your child's benefit. Family members often serve as trustees, but they need to understand the rules about distributions and record-keeping. Professional trustees (banks or trust companies) charge fees but offer expertise. Pooled trusts provide a middle ground: the nonprofit handles investments and distributions, and you or your child can still have input. In North Carolina, organizations like the Disability Advocates or local community foundations may offer pooled trust options.

Mistakes to Avoid

• Using the wrong trust type - For example, funding a third-party trust with your child's assets would disqualify the trust from being "special-needs." Always match the trust type to the source of funds.
• Failing to consider Medicaid payback - With first-party trusts, any money left after the child dies goes to the state to reimburse Medicaid costs. This is required by federal and North Carolina law. Plan for this in your estate planning.
• Not updating the trust after a move - If your family moves to another state, the trust may need revisions to comply with that state's laws. North Carolina's trust code has unique provisions, so always consult a local attorney.
• Making cash gifts directly to the child - Even small gifts can push a child over the SSI asset limit. Instead, write a check to the trust or buy items directly for the child's benefit.
• Neglecting to coordinate with ABA therapy funding - Some ABA providers in North Carolina accept Medicaid through the state's managed care plans. If your trust covers therapy, ask the provider to bill the trust directly for non-covered services. Nearby ABA Therapy's free matching service can help you find providers experienced with trust-funded care.

How Nearby ABA Therapy Helps You Navigate Care

Setting up a special-needs trust and benefits plan is a critical step, but you still need to find quality ABA therapy for your child. Nearby ABA Therapy is a free nationwide matching service that connects families with vetted, BCBA-led providers in North Carolina. We work with clinics that accept insurance and Medicaid, so your trust funds can be reserved for therapies that complement ABA, while insurance or benefits cover the core sessions. Our team understands the unique financial landscape of special-needs planning and can help you find providers who are familiar with trust-funded arrangements.

There is no cost to you - we are not a provider, but a referral service. Simply fill out our form, and we will match you with up to three options in your area, including clinics that serve communities from Asheville to Wilmington. By combining a solid legal foundation with the right therapeutic support, you can ensure your child thrives.