People with disabilities have special needs. Often the person on disability relies on certain governmental benefit programs such as Medicaid or Supplemental Security Income (SSI) for support and medical insurance. These programs have strict income and asset eligibility requirements. A well intended inheritance could in fact cause the person to lose important benefits. Proper planning can avoid these problems.
In our office, we often have parents of a disabled child tell us that they plan to disinherit the disabled child and leave their estate to another “well” child whom they expect will “look after” the disabled child. While these parents have good intentions, this can be a recipe for disaster. The healthy child has no obligation of support for the disabled child and could, without any legal consequences, keep all of the inheritance.
Parents will then tell us “my child would never do that.” But then we ask: what if your child gets divorced, dies, is disabled or is in a car accident? The money could then be lost through no fault of the well child. Are you willing to take this chance when there is a safer solution?
The safer solution is to create a Supplemental Needs Trust (SNT) for the benefit of the disabled child. In the parent’s Will or Trust the parent leaves the disabled child’s share to the SNT rather than directly to the disabled child. The funds in a properly crafted SNT should not disqualify the disabled child from benefits. The funds should then be available to help pay for services and “extras” not paid for by the programs. It creates a nest egg for the disabled child and should be protected from the claims of the Trustee’s creditors.
For example, Mom and Dad, in their Wills, leave $50,000 to a SNT created by them for the benefit of their child, Mary, who has Down’s Syndrome and is dependent upon Medicaid for her health insurance. The Trust assets should not disqualify Mary and can be used to pay for things such as extra medical care not covered by Medicaid, or a vacation, or clothing, or perhaps even a car! After Mary dies, any money remaining in the trust will be paid out to whomever Mom and Dad designated when they created the SNT.
A competent elder and special needs attorney can guide families through the difficult issues to create an estate plan that follows the family’s wishes, cares for the disabled individual properly and allows for continuation of government benefits. If you have a loved one dependent on government benefits for support, we encourage you to call our office because we have experience in special needs.