If you have a child or other loved one who is disabled and eligible for SSI and/or Medicaid, it is vital to plan properly for their financial security in the event of your death or disability.

When you have a disabled loved one, whether it’s a child, sibling, niece or nephew, one of your most important goals is making sure that your loved one has all of his or her needs met for the rest of their life. Beware, however, of leaving money directly to someone with a disability.

If your loved one is receiving SSI or Medicaid and the money they receive from you puts them over $2000 in total assets, they will lose ALL Medicaid and SSI benefits, have to spend down everything until they are back below $2000, then re-apply for the benefits. In other words, your money didn’t help them at all. In fact, it probably made things more difficult for them.

There is a way to leave money that will actually benefit your loved one. It’s called a Special Needs Trust (also known as a Supplemental Needs Trust). By leaving money in this specialized type of trust, you can set aside dollars that will be protected for your loved one, available for many of their needs, without kicking them off government benefits. There are very specific requirements for what this trust can and cannot say, so it’s important to work with an experienced estate planning attorney.

You get to choose who will manage the money (the Trustee) and we always recommend you write a Letter of Intent, detailing how you would hope the money would be invested and spent. The most important detail is for the Trustee to determine the applicable state regulations at the time the Trust gets created so that money isn’t spent on anything that would make your loved one ineligible for benefits, as there are a number of rules that change over time.

Some people want to make things simpler and just leave extra money to another loved one to care for the person with the disability. We don’t recommend this. Even if that person is completely reliable, if your money is in a bank account under their name, it can disappear in a divorce, lawsuit, bankruptcy, or other unexpected disaster. And what happens if this custodian dies? If anything goes wrong (and let’s face it, things rarely go as predicted in life), your loved one will be left without the inheritance you wanted to leave for their care.

For more information about making sure your disabled loved ones are truly taken care of, call our office for a Personal Consultation or join us at one of our upcoming Estate Planning Workshops.

For more information

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