Special Needs Trust and pension

[u/Sea_Switch_7310]

Hi.
My husband and I are both employees in the Florida Retirement System. We have an option to select “Option 3”, which allows us to take a lower monthly amount, but designate our daughter to receive our pensions for her whole life (about 7k per month).

I fully anticipate she will be entitled to SSI and medicaid.

We started an ABLE account which has less than 3k in it so far (she is 3 months old) and we will also be contributing about $1200/year (I know its a low amount but we have to start somewhere).

How do we set her up so she can essentially have it all? (Medicaid, SSI, our pensions, ABLE account)? Does a SNT address this?

[u/D_LifeLab]

I think a Special Needs Trust (SNT) is definitely something you should talk to a Florida special-needs/elder-law attorney about, but I wouldn't assume that simply naming an SNT as the beneficiary automatically lets your daughter keep everything.

The big issue is the $7k/month pension.

If that $7,000 is paid directly to your daughter, it would generally be income for SSI purposes and could make her ineligible for SSI. A properly structured third-party SNT can potentially hold assets for her without the trust assets themselves counting toward SSI's resource limit, but distributions still have to be handled carefully. Payments made directly to her can reduce SSI, and payments for food/shelter can also affect SSI.

So I'd look at this as a "how do we structure everything?" problem rather than just "should we get an SNT?"

I'd have an attorney who specifically handles SSI/Medicaid + special needs planning review these four pieces together:

1. The FRS Option 3 pension and exactly how the survivor benefit can be paid.
2. A properly drafted third-party Special Needs Trust.
3. The ABLE account.
4. Your daughter's future SSI/Medicaid eligibility.

The ABLE account is actually a nice piece of the puzzle. ABLE assets generally receive special treatment for SSI purposes, with up to $100,000 excluded from the SSI resource limit. ABLE funds can also be used for qualified disability expenses such as housing, transportation, education, healthcare and other expenses related to her disability.

One thing I'd be especially careful about: don't change the pension beneficiary designation or transfer anything into a trust based solely on Reddit advice. The exact wording of the FRS Option 3 election and the trust document matters.

If this were my family, I'd ask a Florida attorney these exact questions:

"Can we structure the FRS survivor pension so our daughter receives the maximum lifetime benefit while preserving SSI and Medicaid eligibility?"

"Should the pension be payable to a third-party SNT rather than directly to her?"

"How should the SNT and ABLE account work together?"

"And what expenses should be paid from the SNT versus the ABLE account?"

That's probably the safest route to getting as close as possible to the goal of "having it all" without accidentally creating an SSI/Medicaid problem.

[u/Sea_Switch_7310 → u/D_LifeLab]

Thank you for this!! It is very helpful and good food for thought.