Settlement Planning for Children with Special Needs

Children with special needs require extra care when it comes to settlement planning. The cost of caring for a minor with a disability can be considerable. Short-term and long-term financial requirements must be considered, along with protecting needs-based government benefits where applicable.

Settlements for minors typically require court approval to prevent any mishandling of the funds. There are state- and sometimes county-specific guidelines around different settlement options for children.

Trusts for Minors

A minor with immediate medical needs can benefit from a minor’s trust. Funds are managed by a trustee and must be used to meet the minor’s needs. Any funds remaining in the trust are distributed when the minor reaches the age of majority. Minors’ trusts are sometimes called HEMS (Health, Education, Maintenance, and Support) Trusts or Settlement Protection Trusts.

Another trust alternative is a Special Needs Trust (SNT). This type of trust allows the minor to retain access to needs-based government benefits such as SSI and Medicaid. It is available only to individuals who meet government disability standards. As with a minor’s trust, a trustee manages the funds, and any disbursements must be made for the sole benefit of the minor.

In place of funding a trust with the entire net settlement, many courts will permit a hybrid approach where a certain percentage of the minor’s settlement is placed into a structured settlement annuity that pays into the trust over time. Unlike a trust, the structured settlement annuity grows income tax-free with a guaranteed rate of return. In some instances, the plaintiff can incorporate a cost-of-living adjustment into the structured settlement annuity to increase the guaranteed rate of return.

ABLE Account

An individual who has been declared disabled before age 26¹ will qualify for an ABLE (Achieving a Better Life Experience Act) account. ABLE accounts are easily set up online. Monies in an ABLE account can be used for qualified expenses and grow tax-free as long as certain conditions are met. ABLE accounts have monetary limits but are a good settlement and life planning tool for people with disabilities.

Learn More About Settlement Options for Minors Today

To learn more about minors’ trusts, Special Needs Trusts, and ABLE accounts, contact your Sage Settlement Consultant today.

¹As of January 1, 2026, the age of disability onset will be raised from 26 to 46.