Delaware Special Needs Trust Rules (2026) | Complete State Guide

1. 1. Delaware is America’s trust capital — and that benefits your family.
   Delaware has some of the strongest trust laws in the country. A 2025 update (HB 103) specifically strengthened creditor protection for trust beneficiaries with discretionary interests — exactly the kind of protection a special needs trust needs. Your child’s trust assets are shielded from creditors under Delaware law more effectively than in most other states.
2. 2. Delaware is a 1634 state — SSI approval means automatic Medicaid.
   If your child qualifies for SSI, they automatically qualify for Delaware Medicaid. No separate application, no additional paperwork. This is simpler than states where you have to apply to Medicaid separately with different criteria.
3. 3. Delaware Medicaid estate recovery is limited — but the rules depend on which type of trust you have.
   (For third-party SNTs) — If you (the parent) set up a third-party trust, Delaware Medicaid can never touch it. Delaware limits estate recovery to assets that pass through probate — properly structured trusts bypass probate entirely. That’s stronger protection than states with expanded estate recovery.
   
   (For first-party SNTs) — Different rule. Because this trust was funded with your family member’s own money, federal law (42 USC §1396p) requires that any funds left in the trust when they pass away must first reimburse Delaware Medicaid for benefits paid during their lifetime. This isn’t estate recovery — it’s a payback clause built into the trust itself. Whatever remains after Medicaid is repaid goes to the family. This is the tradeoff for protecting benefits during your family member’s life.
4. 4. Delaware has NO waitlist for developmental disability services.
   This is enormous. Most states have waitlists stretching 5 to 15 years for disability services. Delaware’s DDDS Lifespan Waiver has no waitlist — eligible individuals can access services right away, with eligibility determined within 30 days of a complete application. If you haven’t applied yet, contact DDDS at 302-744-9700.
5. 5. If your child’s income exceeds the Medicaid limit, they need a Qualified Income Trust. (For first-party SNTs)
   Delaware is an income cap state. If your child’s income is over about $2,485/month, they won’t qualify for Medicaid long-term care without a Qualified Income Trust (also called a Miller Trust). It’s a separate trust from the SNT, and your attorney needs to set it up.
6. 6. Delaware’s decanting statute lets you modify trusts without going to court.
   Delaware was one of the first states to allow trust decanting (enacted 2003). If circumstances change — laws update, your child’s needs evolve — a trustee can move assets from one trust to a new one with better terms. No beneficiary consent required, no court approval in most cases. That flexibility is rare.
7. 7. The trust can pay for groceries without reducing your child’s SSI.
   This changed in October 2024. Before that, buying food with trust money cut the SSI check. It doesn’t anymore. This is a big deal for day-to-day quality of life.
8. 8. The trust paying for housing DOES still reduce SSI.
   Rent, mortgage, utilities — if the trust pays those, the SSI check goes down (up to about $351/month in 2026). That’s the tradeoff, and it’s worth understanding before your trustee starts writing checks.
9. 9. Delaware doesn’t require annual court reporting for most trusts.
   Delaware’s Court of Chancery requires trustee accounts no more than once every two years — and for inter vivos (living) trusts, no filing is required at all unless the trust document says otherwise or a court orders it. Less paperwork, lower costs.
10. 10. Delaware has a real alternative to guardianship — and has since 2016.
    When your child turns 18, you may need legal authority to help with decisions. Delaware was an early adopter of supported decision-making (SDM) law in 2016, with updates in 2017, 2019, and 2021. SDM lets your child keep their legal rights while getting help from trusted supporters — no court involvement required. If full guardianship is needed, the Court of Chancery also offers limited guardianship options that only restrict rights where truly necessary.
11. 11. The person managing the trust (the “trustee”) has to account for every dollar — no matter what type of trust you set up.
    Whether you created a third-party trust (funded with your money) or your child has a first-party trust (funded with theirs), Delaware law (12 Del. C. § 3521) provides for trustee accountability through court-supervised accounting. Your family has the right to know how trust money is being spent. If a bank, attorney, or family member is serving as trustee and won’t show you where the money is going, that’s a red flag — and you can petition the Court of Chancery to compel an accounting.

From my 15+ years helping families (including my own):

1. Leaving money directly to your disabled child. A well-meaning grandparent leaves $50,000 in a will to your child — and destroys their SSI and Medicaid. Delaware’s $2,000 asset limit means even a small direct inheritance can wipe out benefits. Every dollar meant for your child needs to go through the trust, not to them.
2. Not leveraging Delaware’s trust-friendly laws. Delaware is the trust capital of America, but most families don’t know what that means for them. Delaware’s strong creditor protection, flexible decanting, and no-tax-on-out-of-state-beneficiaries rules give your trust more protection than the same trust in most other states. Make sure your attorney is using these advantages.
3. Creating the trust but never funding it. A trust sitting in a drawer with no assets in it protects nothing. The trust only works if you actually move assets into it — bank accounts, life insurance beneficiary designations, your will. This is the most common mistake I see.
4. Not applying to DDDS because you don’t need services yet. Delaware has no waitlist for developmental disability services right now — but that doesn’t mean you should wait. Eligibility must be established, and having DDDS services in place gives your family a safety net. Apply at 302-744-9700.
5. Using a Philadelphia attorney who doesn’t know Delaware law. Many Delaware families cross the border for legal help, and that’s fine — but make sure your attorney understands Delaware’s specific trust code, Court of Chancery procedures, and Medicaid rules. Pennsylvania and Delaware handle estate recovery, guardianship, and trust administration differently.
6. Not realizing first-party trusts pay Medicaid back at death. If the trust was funded with your child’s own money (from a settlement, inheritance, or work), Delaware Medicaid gets reimbursed from whatever is left when your child dies. This is why moving money into a DEPENDABLE (ABLE) account matters — though Delaware does require Medicaid payback on ABLE accounts too (see below).
7. Waiting until after you die to set up the trust. If you’re reading this page, do it now. Not next year. Your estate plan, your will, your life insurance beneficiary designations — all of it needs to point to the trust before something happens to you.

The best way to avoid these mistakes? Work with an attorney who knows Delaware special needs law. Find Delaware attorneys →

Important: Delaware follows the federal ABLE Medicaid payback requirement. If your child receives Medicaid services after opening a DEPENDABLE account, Delaware Medicaid can file a claim against the account balance at death for the amount of services paid after the account was opened. This is different from states like Florida and Oregon that have waived ABLE Medicaid payback entirely. Factor this into your planning.

Beyond the Trust: Other Delaware Planning Steps

Guardianship: When your child turns 18, you may need legal authority to help with decisions. Delaware offers supported decision-making (since 2016), limited guardianship, and full guardianship through the Court of Chancery. Compare your options →
DDDS Services: Delaware has no waitlist for developmental disability services — apply through DDDS (302-744-9700) even if you don’t need services today. Learn about waivers →