Should Parents EVER Leave an Inheritance Outright to a Child who has a Disability?
There are few absolutes in estate planning, but this is one. If a child has a significant mental disability, the answer is parents should not leave an inheritance outright to a child with a significant mental disability.
If the child has a significant mental disability then the child will obviously have difficulty managing the inheritance. And this inheritance is the child's last safety net -- so from a planning perspective parents generally want to be conservative and legally set up their estate plan to protect the inheritance.
If the child inherits the money directly in his or her name the child will typically lose needs-based government benefits - the big ones being Supplemental Security Income (SSI) and Medicaid.
With these needs-based government benefits the person with a disability can't own more than an extremely small amount of countable resources - often no more than $2,000.
So, if the child inherits money directly he or she will lose these very valuable government benefits.
And if the child has been receiving government benefits before or after getting the inheritance, the state may actually try to seize the inheritance for health or residential cost-of-care claims. A properly drawn special needs trust solves all these problems.
The special needs trust is a trust created for a beneficiary with a disability that is designed to provide for the needs of the beneficiary to qualify for needs-based government benefits such as Supplemental Security Income and Medicaid. Also referred to as a supplemental needs trust.
In effect, the trust is a legal instrument that separates the responsibility of ownership of specific property from the benefit of ownership. The person who has responsibility of ownership, the trustee, manages the assets according to the instructions written in the trust agreement by the creator of the trust for the benefit of the beneficiary. The trustee derives no benefit from the trust property except compensation received for performing his or her duties.
On the other hand, if the child has a physical disability with no mental impairment and the child never expects to need government benefits because he or she can work, in that case, a special needs trust wouldn't be necessary.
But the saying "never say never" may apply to the planning process, because although the person with a physical disability may not need government benefits now, they may need benefits in the future if the physical disability gets worse when the person is older.
The special needs trust is the most useful estate-planning tool available for providing future security for persons with disabilities.
Related Tags: special needs trust, special need trusts, supplemental needs trust
Attorney L. Mark Russell, author of Planning For The Future, has advised hundreds of parents who have a child with a disability. Arm yourself with time tested strategies that will protect your child and assure their happy and fulfilled life, even when you are no longer able to care for them yourself. There's still time to plan for your child's future IF you begin now by going to http://www.specialneedslegal.com Your Article Search Directory : Find in Articles
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