Episode 67: How to Give Without Jeopardizing Government Benefits

Written By Jillian Mastroianni

Episode 67

Host: Jill Mastroianni

How to Give Without Jeopardizing Government Benefits

A grandmother wants to divide her wealth equally among her grandchildren — but one grandchild has Down syndrome, and a simple gift could unintentionally jeopardize eligibility for important government benefits. In this Tuesday Triage episode, Jill walks through required minimum distributions (RMDs), why “equal” doesn’t always mean “fair,” and how thoughtful planning protects both generosity and long-term support. You’ll learn how special needs planning tools like ABLE accounts and third-party special needs trusts help families give with love without causing unintended consequences.

What You’ll Learn in This Episode

The Real Question Behind the Gift. Why a grandmother’s desire to treat grandchildren equally can create hidden risks, how generosity and fairness sometimes require different planning strategies, and the importance of slowing down before writing checks.

Understanding Required Minimum Distributions (RMDs). What an RMD actually is and why age 73 matters, how the IRS calculates your RMD using life expectancy tables, and the difference between a traditional IRA and a Roth IRA when it comes to RMD rules.

Family Dynamics Most People Skip. Why conversations with parents matter before giving money to grandchildren, common emotional expectations that quietly attach themselves to gifts, how financial gifts can create tension between generations, even when well intended, and alternatives to cash gifts that still feel meaningful

Accounts for Minors Explained Simply. What a 529 account is and when it makes sense, the difference between UTMA and UGMA accounts, and why custodial accounts legally belong to the child.

Special Needs Planning Essentials. What “means-tested benefits” actually means, why direct gifts can unintentionally reduce or eliminate SSI or Medicaid eligibility, how eligibility thresholds work and why even temporary increases matter, and the long-term consequences of well-intentioned gifts.

Tools That Help Families Give Safely

Third-party special needs trusts. Funded by parents or grandparents and assets don’t count against benefits. when properly drafted

ABLE accounts. What ABLE stands for (Achieving a Better Life Experience), how these accounts allow savings for individuals with disabilities, 2026 contribution limits and key restrictions, and why coordination with parents is crucial.

The Bigger Lesson. Why communication matters as much as the money itself, how mismatched expectations can create family conflict, and why thoughtful planning is an act of love, not just a legal exercise.

Resources & Links

Tennessee Estate Planning Services with Jill Mastroianni: https://www.deathreadiness.com/estate-planning-solution 

Connect with Jill:

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  • A grandmother wants to divide her wealth equally among her grandchildren — simple, right? But one of those grandchildren has Down syndrome, and a well-intentioned gift could accidentally jeopardize his eligibility for government benefits. Today, we break down what “means-tested” really means, why special needs planning matters, and how families can give generously without creating unintended consequences. Smart giving starts with understanding the rules.

    Welcome to The Death Readiness Podcast. This is not your dad’s estate planning podcast. I’m Jill Mastroianni — estate planning attorney, death readiness guide, and your translator for wills, trusts, probate, and the conversations most families avoid. If you’ve been wondering things like, ‘Can a trust protect what I leave to my children?’ ‘What happens if I give someone power of attorney over me?’ and ‘How can I help my parents while respecting their independence?’ You’re in the right place.

    My mother was a teacher, so she was home with us during the summers. She kept us busy — walking, biking, swimming — and taking care of our four-legged family members.

    We lived near the Great South Bay on Long Island, and one summer day we were walking our two dogs, Velvet and Sandy, home from the beach when another dog joined us. Velvet was a black lab, and this dog looked almost exactly like her.

    If you’ve ever tried to walk leashed dogs while a loose dog tags along, you know the chaos, endless pulling and circling.

    This dog followed us all the way home. We somehow got ourselves inside while keeping the mystery dog outside, and it spent most of the day hanging around our yard.

    Later that evening my dad came home from work, swung open the back door with total confidence, and announced, “Look who I found!”

    He thought we had lost Velvet and that in our summer distraction we just hadn’t noticed she was missing.

    Except, we hadn’t lost her.

    My dad had proudly, and so very smugly, brought the exact dog we’d been avoiding all day right into the house.

    I grabbed Sandy, our smaller, older dog, and ran into the bathroom. Behind that closed door, the noise sounded like a cartoon tornado as Velvet and her look-alike tore through the house.

    The way my dad opened that door, full speed ahead, completely confident in a situation he didn’t actually understand, is how a lot of people approach estate planning.

    In our case, the consequences were fifteen minutes of chaos and a great family story.

    But when it comes to estate planning, especially when a family includes someone with special needs, misplaced confidence can lead to much more significant consequences.

    Today’s Tuesday Triage question comes from a grandmother who’s doing exactly what we hope people do: slowing down, asking questions, and making sure her gifts actually have the impact she intends.

    Jaye is a grandmother in Tennessee who wants to divide her required minimum distributions equally among her grandchildren. One of Jaye’s grandchildren has Down syndrome.

    How does Jaye give with love and fairness without accidentally jeopardizing her grandchild’s eligibility for government benefits?

    We’ll get to the answer — but first, let’s make sure we’re all on the same page about what a required minimum distribution is.

    Jaye turned 73 in December 2025. That matters because age 73 is when federal law requires people to start taking required minimum distributions, or RMDs, from certain retirement accounts.

    For Jaye, that means she has until April 1, 2026, to take her first RMD from her IRA. That date is called her required beginning date. A required minimum distribution, or RMD, is the minimum amount the IRS requires you to withdraw each year, beginning with that required beginning date.

    The idea is simple: these accounts grew with tax advantages, and eventually the government wants you to start paying taxes on that money. So instead of letting the account grow forever, you’re required to withdraw at least a minimum amount each year and pay taxes on what you take out.

    The amount Jaye must withdraw this year is based on her IRA balance as of December 31, 2025.

    There’s a little more nuance here than we need to get into for a Tuesday Triage episode, but I do want to highlight one important detail before we move forward: Jaye has a traditional IRA, not a Roth IRA.

    That distinction matters because required minimum distribution rules don’t apply to Roth IRAs while the original owner is alive. Those rules apply to beneficiaries after the owner’s death.

    So, federal law currently sets age 73 as the starting age for required minimum distributions.

    And if you’re listening and thinking, wait — I thought it was 72… or maybe 70 and a half… you’re not wrong. Those were the prior ages. The law changed starting with the 2023 tax year, and now the age is 73.

    So what exactly does Jaye, who turned 73 in December 2025, need to do by April 1, 2026?

    She takes the value of her IRA as of December 31, 2025, and divides that number by a life expectancy factor provided by the IRS.

    We obviously can’t know anyone’s real-life expectancy, so the IRS gives us a table to use. Based on that table, Jaye’s life expectancy is 26 and ½ years.

    Let’s use simple numbers for an example. If Jaye’s IRA balance was $106,000 on December 31, 2025, she divides that by 26.5. That gives us a required minimum distribution, an RMD, of $4,000.

    That means Jaye must withdraw $4,000 from her IRA by April 1, 2026,  and she’ll pay income tax on that $4,000 amount.

    Now we have some context for where Jaye’s gift is coming from.

    For purposes of this example, let’s use the $4,000 RMD and assume Jaye has four grandchildren.

    The math is simple: if she wants to divide it equally, each grandchild would receive $1,000. 

    Jaye would pay tax on that $4,000 RMD, so, in reality, she wouldn’t have the full $1,000 to give to each grandchild, but you get the point.

    Before Jaye writes any checks, though, I’d recommend one important step: a conversation with her children, the parents of the grandchildren she wants to give these gifts to.

    If any of the grandchildren are minors, do they already have accounts set up to receive gifts? And just as important, are the parents comfortable with their child receiving that amount of money?

    And even though Jaye is coming from a place of generosity, it’s worth pausing to think about the bigger family dynamics.

    If any of the grandchildren are adults, is money a sensitive topic? Are there spending habits or financial realities Jaye might not see that the parents are aware of? Could a well-intentioned gift accidentally create tension between parents and adult children, or between Jaye and her adult grandchildren?

    It’s also helpful for Jaye to check in with herself. What does she hope the gift will mean? How does she expect gratitude to be shown? And how might she feel if a grandchild spends the money differently than she imagined, maybe on a vacation instead of saving it for the future?

    Gifts are generous, but money almost always comes with expectations, sometimes spoken, sometimes unspoken. And the people receiving the gift may not experience those expectations the same way the giver does.

    So before moving forward, I’d encourage Jaye to be honest with herself about what she hopes will happen  and what might feel disappointing if it doesn’t.

    If there’s hesitation about giving cash directly, families can usually find a middle ground. Maybe Jaye pays for a summer camp or another meaningful experience for the grandchildren instead.

    And if everyone is comfortable with the grandchildren receiving money directly, then the next step is getting into the logistics of how those gifts should actually be made.

    If a minor already has an account set up, it’s usually something like a 529 account or an UTMA or UGMA account.

    A 529 account is a tax-advantaged education savings account. The money can grow over time and, if used for qualified education expenses, come out tax-free.

    UTMA stands for Uniform Transfers to Minors Act, and UGMA stands for Uniform Gifts to Minors Act. UTMA accounts are more flexible and can hold almost any type of asset, like, for example, real estate or fine art. UGMA accounts are limited to financial assets like stocks and bonds. Both types of accounts are custodial accounts where an adult manages money on behalf of a child until the child reaches the age of majority, usually 18 or 21, depending on the state.

    The big-picture difference is this: a 529 plan is money set aside specifically for education and controlled by an adult, while UTMA and UGMA accounts are legally the child’s money. The adult is simply managing it until the child gets direct access to it at age 18 or 21.

    Once Jaye and the parents decide where the gift should go, the next question is practical: how should the check actually be written?

    Let me give you a real example. Most of my accounts are with RW Baird. If my dad wanted to make a gift to my daughter, I’d ask him to make the check payable to “RW Baird FBO — which means for the benefit of — April Mastroianni,” and include the account number in the memo line. He could then hand me the check, and I’d make sure it gets deposited correctly.

    And, I suspect Jaye may already be a step ahead here. I imagine she’s had some of these early conversations, and that’s probably why she’s asking today’s question.

    One of Jaye’s grandchildren has Down syndrome. For purposes of this episode, we’ll call him Paul.

    Jaye wants her gift to help Paul, not accidentally create problems for him.

    Whether Paul is a minor or an adult, protecting Paul’s eligibility for certain government benefits is really important.

    Many people with disabilities rely on means-tested benefits like Supplemental Security Income, or SSI, and Medicaid. These programs often provide access to medical care, support services, and long-term stability that private money alone can’t replace.

    “Means-tested” simply means the government looks at someone’s income and assets to decide whether they qualify. If an individual’s resources or income go above certain limits, even temporarily, benefits can be reduced or lost.

    So if Paul were to receive money outright, even from a loving grandparent, that gift can unintentionally push him over those limits.

    Jaye wants to be generous while protecting the foundation that allows Paul to be supported over the long term.

    And this is exactly where real legal planning matters.I’m now practicing law again and offering Tennessee estate planning services, helping families put the right structures in place before good intentions turn into unintended problems. If you’re in Tennessee and this sounds like your family, you can learn more about working with me at DeathReadiness.com

    Instead of giving money directly to someone with special needs, families often use tools like a properly designed third-party special needs trust or an ABLE account. Both are ways to give generously while protecting an individual’s eligibility for government benefits.

    A third-party special needs trust is funded with money that belonged to someone other than the person with the disability — parents, grandparents, or other family members. When those assets stay inside a properly drafted trust, they don’t count against eligibility for means-tested benefits like SSI and Medicaid.

    An ABLE account, which can be opened online through your state’s ABLE plan, works a little differently and it doesn’t require a lawyer to set up. ABLE stands for Achieving a Better Life Experience. Think of it as a special savings account designed for individuals with disabilities. The individual, along with family members and friends, can contribute to it.

    Funds in an ABLE account are also exempt for government benefit eligibility purposes, up to certain limits.

    There are contribution limits that you need to pay attention to. For example, balances over $100,000 can affect eligibility for benefits. And for 2026, the total annual contribution limit is $20,000 coming from all sources.

    So if Jaye decides to contribute to an ABLE account for Paul, she’ll want to coordinate closely with his parents to make sure contributions stay within those limits.

    Ultimately, Jaye’s next step is to get clear instructions from Paul’s parents about the best way to make the gift, whether that’s to an ABLE account or to a third-party special needs trust.

    And what if Paul’s parents haven’t set up an ABLE account or a third-party special needs trust yet? What does Jaye do then?

    In that situation, I would encourage Jaye to start with a simple conversation. She can explain that she’d love to divide her required minimum distribution equally among her grandchildren and ask whether Paul’s parents would be comfortable receiving the gift directly to use for Paul’s benefit until a more formal structure is in place.

    Of course, Jaye needs to feel comfortable with that arrangement, too.

    And really, this isn’t unique to Paul. The same issue can come up with any grandchild, especially minors. Maybe the parents of Jaye’s other grandchildren haven’t set up 529 plans or custodial accounts yet.

    Parenting is busy. Sometimes we’re just trying to get lunches packed and manage the next meltdown, and setting up savings vehicles falls to the bottom of the list. And sometimes there simply isn’t extra money sitting around, so there hasn’t been a reason to open a special account yet.

    Jaye could set up a 529 account or a custodial account herself for the benefit of a grandchild other than Paul, but, again, I would only recommend doing that after a conversation with the grandchild’s parents.

    Every family — every grandparent, every parent, every grandchild — is different. Values around money and gratitude vary, and they often change with life experience.

    I know for me, I didn’t fully appreciate my parents until I became a parent myself. I remember sitting in the backseat of the car as a kid repeating, “Mom? Mom? Mom?” while she stared blankly ahead, completely zoned out, taking a tiny mental break from motherhood while still being right there with us.

    Jaye’s desire to give to her grandchildren is incredibly generous. The only caution I would offer is this: communication matters every step of the way, not just with her children and grandchildren, but with herself.

    What does she hope this gift will mean? How does she hope it will be used? And how might she feel if things don’t unfold exactly the way she imagined?

    If she senses that mismatched expectations could create tension, it may be worth taking money off the table, at least for now. There are so many other meaningful ways to use that generosity: supporting a cause she loves, visiting her grandchildren more often, or even doing something for herself that she’s been putting off because it felt too indulgent.

    Jaye, thank you for asking this question. The fact that you’re thinking ahead, and taking the time to learn before you act, is exactly what thoughtful, loving planning looks like.

    I’m now actively practicing law again and offering estate planning services for clients in Tennessee. So if you’re listening and thinking, “I need help getting my own plan in place,” you can learn more about working with me at DeathReadiness.com. That’s deathreadiness.com.

    Thanks for joining me today.

    This is Death Readiness, real, messy and yours to own. I’m Jill Mastroianni and I’m here to help you sort through it, especially when you don’t know where to start.

    Hi, I'm April, Jill's daughter. Thanks for listening to The Death Readiness Podcast.  While my mom is an attorney, she’s not your attorney.  The Death Readiness Podcast is for educational and entertainment purposes only.   It does not provide legal advice.  For legal guidance tailored to your unique situation, consult with a licensed attorney in your state.  To learn more about the services my mom offers, visit DeathReadiness.com.

Jillian Mastroianni
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Episode 66: Why Small Acts of Care Matter More Than You Think