If you want to leave money or property to a loved one with a disability, you must plan carefully. Otherwise, you could jeopardize your loved one’s ability to receive Supplemental Security Income (SSI) and Medicaid benefits. By setting up a “special needs trust” in your will, you can avoid some of these problems.
Owning a house, a car, furnishings, and normal personal effects do not affect eligibility for SSI or Medicaid. But other assets, including cash in the bank, will disqualify your loved one from benefits. For example, if you leave your loved one a cash gift, that gift could disqualify your loved one from receiving SSI or Medicaid.
As a parent of a special needs child, you are well aware of the day to day challenges that coincide with the love and care you already provide. Preparation for and understanding of possible planning issues is critical to the estate planning decisions that must be made. Even the most diligent parents can soon learn of the multitude of estate planning obstacles they may not be aware of.
How a Special Needs Trust Can Help
One way to still maintain your SSI or Medicaid benefits and still receive financial assistance is to create a “special needs” or “supplemental needs trust.” Then, instead of leaving property directly to your loved one, you leave it to the special needs trust. You also choose someone to serve as trustee, who will have complete discretion over the trust property and will be in charge of spending money on your loved one’s behalf. Because your loved one will have no control over the money, SSI and Medicaid administrators will ignore the trust property for program eligibility purposes. The trust ends when it is no longer needed — commonly, at the beneficiary’s death or when the trust funds have all been spent.
How Trust Funds Can Be Spent
The trustee cannot give money directly to your loved one — that could interfere with eligibility for SSI and Medicaid. But the trustee can spend trust assets to buy a wide variety of goods and services for your loved one. Special needs trust funds are commonly used to pay for personal care attendants, vacations, home furnishings, out-of-pocket medical and dental expenses, education, recreation, vehicles, and physical rehabilitation.
If you can’t come up with a good candidate to serve as a trustee or are leaving a relatively modest sum and don’t want to set up a separate special needs trust, consider a “pooled trust.” These are special needs trusts run by nonprofit organizations that pool and invest funds from many families. Each trust beneficiary has a separate account, and the trustee chosen by the nonprofit spends money on behalf of each beneficiary. Pooled trusts (also called community trusts) are available in many areas of the country.
There are situations where a special needs trust may not be the right approach, especially in situations where an irrevocable trust is created but the beneficiary regains mental or physical capacity. It is important to consult with us prior to planning.
Step by Step Plan Development
The goal of special needs estate planning is to provide security and care that will enhance the quality of life for the child in need. What can make this planning difficult is ensuring that the assets left behind do not negatively impact the child’s future eligibility for essential benefits programs. Planning that far ahead may feel intimidating but our skilled estate planning attorneys at Bridge Law LLP will support you at every step.
The best time to get started is right now.