Special Needs Planning in Florida: 2025 Update

Planning for a loved one with disabilities is a long-term responsibility—and in 2025, the legal and regulatory environment in Florida continues evolving. This update covers what’s new, what stays essential, and how families can protect eligibility for government benefits (such as Medicaid or SSI) while leaving assets to enhance quality of life.

Why Special Needs Planning Matters

People with disabilities often rely on government programs like Medicaid, Supplemental Security Income (SSI), and long-term care subsidies. However, those programs have strict limits on income, assets, and distributions. Without prudent planning, an inheritance, settlement, or gift—even with the best intentions—can disqualify someone from critical benefits.

A special needs (or supplemental needs) plan ensures:

• The beneficiary keeps qualified benefits

• The family can supplement needs (medical, education, therapies, recreation) without jeopardizing programs

• Assets meant for the beneficiary are managed wisely by trustees who understand the legal landscape

What’s New & Important in 2025 for Florida Plans

1. Florida Trust Law Changes (Senate Bill 262, effective June 20, 2025)

Florida now provides more flexibility for trustees under its updated trust statute. Among the changes:

• Trustees with the power to invade principal ("authorized trustees") can now decant or shift assets into supplemental needs trusts, so long as the new trust remains aligned with the original purpose.

• These “decanting” powers allow adjustments over time as your beneficiary’s needs evolve—without needing full trust restatement.

• Some procedural rules, notice requirements, and limitations have changed, giving trustees more room to act thoughtfully.

These changes can benefit special needs planning by making it easier to update or adapt trust structures without starting from scratch.

2. Expanded Flexibility in Distributions & Food as a Benefit

In late 2024, a key federal update removed food from the definition of “in-kind support and maintenance” (ISM) for SSI purposes. This is a big win for trust beneficiaries: trustees can now use the trust to pay for groceries or meals without automatically reducing the recipient’s SSI check.

However, shelter costs (rent, mortgage, utilities) are still considered ISM if paid improperly, so planning for housing support must remain careful and deliberate.

3. Pooled Trusts Remain Valuable Tool in Florida

Pooled special needs trusts pool resources among many beneficiaries but maintain separate subaccounts. Their advantages include:

• Holding both income and assets while preserving Medicaid eligibility

• Transfers into pooled trusts do not count as gifts (so they avoid triggering gift-penalty lookback periods)

• Flexibility in making distributions for supplemental needs: beyond medical care to recreation, hobby supplies, travel, or assistive technology

However, careful rules apply as to what kinds of distributions are allowed without impacting benefits. Trustees must be cautious about shelter payments or payments that could be considered ISM.

Types of Special Needs Trusts to Consider

Here are the main forms of trusts used in special needs planning in Florida:

• Third-Party Special Needs Trust: Funded by someone other than the beneficiary (parents, grandparents, others). Does not require Medicaid payback.

• First-Party (Self-Settled) Special Needs Trust: Funded with the beneficiary’s own assets (e.g. a lawsuit award). Must include a payback clause to reimburse Medicaid when the beneficiary dies.

• Pooled Special Needs Trust: Managed by a nonprofit; each beneficiary has individual subaccounts, but the funds are pooled for investment.

• Testamentary Special Needs Trust: Created under a will and comes into effect when the grantor dies.

Choosing the right type depends on who is funding the trust, how much funding is involved, and what your long-term goals are.

Key Elements Every Florida Special Needs Plan Should Include

To be effective in 2025, your special needs plan should:

1. Name a capable trusteeSomeone who understands benefit rules, distribution limitations, and fiduciary duties. Many families use a professional co-trustee for oversight.

2. Draft clear distribution powersThe trust should expressly allow for supplemental needs (therapy, education, recreation) but prohibit distributions that look like “basic support” unless structured properly.

3. Include Medicaid payback clauses (if required)For self-settled trusts, federal law generally requires that any remaining assets, after paying debts and administration, go to the state to reimburse Medicaid.

4. Allow decanting or adjustment flexibilityThanks to Florida’s 2025 trust changes, trusts can now be more adaptable—making transitions or changes easier over time without full rewriting.

5. Coordinate with ABLE accountsABLE (Achieving a Better Life Experience) accounts allow tax-advantaged savings for qualifying disability expenses without jeopardizing benefit eligibility. Your special needs plan should consider ABLE as a complement.

6. Prepare a Letter of IntentThis non-binding document describes beneficiary care preferences, daily routines, medical needs, wishes, and personal background. While not legally enforceable, it guides trustees and caregivers in real life.

7. Plan for residual distributionsDetermine who gets leftover trust funds upon the beneficiary’s death (after Medicaid reimbursement, if applicable). This might be siblings, charities, or other heirs.

Common Mistakes to Avoid

• Giving money outright to the beneficiaryThis often leads to disqualifying benefits, or loss of eligibility.

• Poor trustee choiceA trustee unfamiliar with disability benefits or Medicaid rules can inadvertently harm eligibility or waste assets.

• Treating housing support improperlyPayments for rent or mortgage from a trust must be handled carefully so as not to count as ISM and reduce SSI.

• Not updating trust documentsLaws, rules, and personal circumstances change—regular review is essential.

• Ignoring the interaction with Medicaid or SSIThe trust must always be structured to work within those systems, not against them.

Next Steps for Your 2025 Special Needs Planning

• Review your existing trusts and beneficiary designations in light of 2025’s law changes

• Talk with your attorney about adding decanting flexibility so you can adapt the trust structure later without starting over

• Develop or refresh the Letter of Intent for your loved one

• Consider opening or coordinating an ABLE account where possible

• Consult an elder law / special needs planning attorney to perform a compliance check

At Absolute Law Group, we guide families across Florida through every step of special needs planning. From selecting the right trust type, drafting proper documents, coordinating ABLE accounts, to guiding trusts through administration—we specialize in protecting both care and legacy.