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Preserving Government Benefits for Your Special Needs Child: A Smarter Way to Plan

Robin Burner Daleo • Oct 25, 2023

Question:

My husband and I are getting ready to prepare our wills for the first time. We are in our late fifties and have three children; our youngest son is disabled and receives government benefits in the form of Supplemental Security Income and Medicaid. A friend of mine recently told me that me that we would have to disinherit him to prevent him from losing his government benefits. We really hate the idea of disinheriting any of our children, is there another way to handle this?

Answer:

You do not have to disinherit your son to ensure that he does not lose his government benefits. There are many misconceptions regarding Estate Planning for families with Special Needs children. The most common of those misconceptions is that the only way to ensure that a disabled child will continue to benefit from State administered programs is to disinherit him.

As you know, government benefits are designed to provide basic necessaries such as food, shelter and clothing. With proper planning, a Special Needs Trust can be used as a vehicle to pass assets to a disabled beneficiary while protecting his government benefits. Because the assets are held in trust, they can be used to enhance the quality of life of the beneficiary without making him ineligible for needs based benefits such as Medicaid or SSI.

A Special Needs Trust can be created, either in a Last Will & Testament or in a separate stand-alone document. When properly drafted, a Special Needs Trust permits a disabled person to inherit, while still maintaining their much needed government benefits. However, rather than permitting the disabled individual to inherit outright, the monies are directed to a trust which is managed by a chosen trustee. The trustee is charged with administering the trust and the assets held in the trust. Trust assets can be used to supplement, not supplant, the benefits that your child is receiving. For example, the money in the trust could be used to pay for comfort items such as clothing, entertainment, computers, home appliances and any number of quality of life enhancing expenses. Trust money can also be used to cover expenses that government benefits do not cover such as additional medical or dental needs, special equipment, or special dietary needs. An added benefit to creating a SNT during your lifetime (as opposed to in your Last Will and Testament) is that your extended family may make gifts to the trust, either during their lifetime or when creating their own estate plan.

For those with disabled beneficiaries, the importance of early planning is immeasurable. Failure to plan could result in a direct inheritance causing a beneficiary to be ineligible for crucial government benefits. It is especially important to consult an attorney who is well-versed in the area of Special Needs planning so as to ensure that your estate plan takes into account the unique needs of your child. As you know, every child and every disability is different and the trust that you draft for your child should reflect their special and unique circumstance.

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May is National Elder Law Month

by Robin Burner Daleo • 03 May, 2024

May is National Elder Law Month, for that reason we have decided to switch from our normal format and answer a question that we are oftentimes asked in our practice, “What is an Elder Law Attorney and why do I need one?” Answer: Elder Law is a fairly new and unknown area of the law. As baby boomers and their parents’ age, they are living longer and oftentimes, living with chronic medical conditions. As the cost of long term care continues to spiral out of control and families struggle to meet the needs of their aging members, an experienced Elder Law attorney can help you and your family members establish an estate plan that maximizes protection of assets while ensuring that your loved one has the best care available to them should they face a health crisis. While it is always best to plan proactively, Elder Law attorneys are adept at crisis planning and oftentimes can provide a solution which can preserve assets or save taxes where others you have consulted have told you that no solution existed. Elder Law attorneys must be familiar with multiple areas of the law - contract law, estate planning, trusts and estate administration, Medicare, Medicaid, health care insurance regulations, Public Health Law, Mental Hygiene Law, the Internal Revenue Code & State and local tax issues. In each instance the issues that we deal with are fact sensitive and the clients must be willing to give us the information that we need to formulate the Elder Law plan. This in itself is oftentimes a struggle as the clientele that we deal with tends to value privacy and are oftentimes reluctant to divulge information regarding their assets and private family issues. The various disciplines that make up the Elder Law practice are in a constant state of flux. As a result, it requires the Elder Law attorney to spend a great deal of time reading current journals and cases and continuously taking legal education courses. In addition, many Elder Law attorneys meet in informal study groups to read, understand and strategize. As the facts change, there will likely be different solutions for each client. What works for one client may be totally inappropriate for another. For instance, in one day, we may see two different clients, both clients are 86 years old, own their own homes, and need long-term care. Client A has a daughter, age 55 and Client B has a niece age 55. Client A, on the eve of going into a nursing facility, is advised to transfer her home to her caretaker daughter, who lives with her and has lived with her for more than 2 years. The transfer does not make Client A ineligible for Medicaid. Client B cannot follow the same plan because her niece is not her child. There are no exceptions for transfers to caregiver nieces. Because we do not have an exempt transfer available to us for Client B I advise Client B to sell the home and advise her that even though no pre-planning has been done, we will likely be able to save more than sixty percent of her aunt’s assets by engaging in crisis planning. Remember - one size fits all – is not the rule. Your Elder Law plan is personal, fact sensitive and requires a careful review of all of the facts and circumstances. By: Robin Burner Daleo, Esq.