If you have a disabled family member, it is critical to engage in proper special needs planning so that your loved one will lead a comfortable life when you are no longer here to provide for them. This is true whether your loved one needs moderate support or extensive supervision and support during their lives.
Many well-intentioned parents and grandparents do not realize that an inheritance can cause problems for a special needs child or grandchild. Government benefits are becoming scarce, and it is more important than ever to avoid disruption or elimination of these benefits.
For example, bequeathing an individual with a disability more than $2,000 may cause the person to become ineligible for government benefits, such as SSI and Medicaid. For many, the loss of these benefits would be a devastating blow. In addition to the cash benefits and medical coverage that would be lost, the person would also lose any number of other government benefits that may be available to eligible persons with disabilities, such as supported employment, vocational rehabilitation services, and residential care options – group housing, job coaches, personal attendant care, and transportation assistance.
Planning is the long-term key
The only reliable method of making sure that the inheritance will actually reach a person with a disability when he or she needs it is through a legal device known as a Special Needs Trust (SNT). The trust is developed to manage resources while maintaining the individual’s eligibility for public assistance benefits. How is this done? Simply put, the family leaves whatever resources it deems appropriate to the trust, and a trustee manages the trust on behalf of the person with the disability.
While government agencies recognize special needs trusts, there are rules and regulations in order for them to work properly. The first thing that many families believe is that a person with a disability cannot have a trust available for their use. This is not true.
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A Special Needs Trust can be “invaded” by governmental benefit sources, and the Trust can be easily invalidated if the proper language is not utilized throughout the Trust. One wrong word or phrase can make the difference between an inheritance that really benefits the person with a disability and one that causes the person to lose access to a wide range of needed services and assistance. As an illustration of this point, suppose that the trust instructed the trustee to pay the person with a disability $200 a month for life. Such a mandatory income may jeopardize government benefit programs.
At an absolute minimum, the Special Needs Trust should contain language that it is intended to provide supplemental and extra care over and above that which the government provides. The Trust should reference the Social Security Operations Manual and the relevant portions from within the Manual that authorize the creation of the Trust. The Trust should also contain language explaining the exception to the 1993 Omnibus Budget and Reconciliation Act (OBRA) provisions that authorize the Trust and the relevant provisions of the United States Code (USC).
When your family member has a disability, you must plan your estate carefully to best benefit your loved one. How you leave assets after death may greatly affect the quality of life for an individual with special needs. Please contact Anderson, Desimone & Green, PC for help in planning for the special needs of your family member.
Note: The information contained herein is taken from the National Information Center for Children and Youth with Disabilities. A portion of their information appears to be extracted from an article by Richard W. Fee, National Institute on Life Planning for Persons with Disabilities.