For many people with special needs, governmental programs like Supplemental Security Income (SSI) and Medicaid are incredibly important, providing not only cash payments to the person with disabilities, but also vital medical coverage and
long-term support services. Most of these programs are needs based, meaning that eligibility is determined by an review of income and assets.
In addition to these benefits, many parents also want to be certain that they leave something behind for their special needs child (or the child’s future caretaker), to meet the child’s needs that are not covered by governmental benefits.
Some people might think that the right thing to do is to leave that child a generous inheritance upon their death. This approach, however, can often lead to the unintended consequence of rendering the special needs child ineligible to
continue receiving needed benefits.
For example, assume that the parents of a special needs child, who have cared for her during her entire life, want to leave her an inheritance of $100,000 when they pass away. Upon the death of the parents, the daughter receives her inheritance
outright and immediately becomes ineligible for the SSI and/or Medicaid benefits she had been receiving. Because she is no longer on government assistance, her health care providers will begin charging her for their services, and her group
home will begin charging for her residency at the facility. For many people with disabilities, an inheritance of $100,000 could easily be eroded to $0 in as little as a year or two. At that point, although the child would again qualify
for government assistance, she would now have nothing – neither her parents nor her inheritance – to help pay for the costs of those items that government benefits won’t cover.
Fortunately, the government has established rules that allow a family to place assets in trust for the special needs person and preserve that person’s eligibility for government aid, provided that the trust meets certain, very specific, requirements.
To qualify as a valid supplemental needs trust under the federal criteria, a trust must:
These are only a few example requirements, and is not an exhaustive list, as the rules regarding the qualification of special needs trusts vary from state to state.
Keep in mind that, in most states, parents with no estate plan will inadvertently leave their special needs child a direct inheritance under the terms of that state’s intestacy laws, thus triggering the “nightmare” scenario of lost benefits
In short, early and thorough estate planning is an absolute must for parents of a special needs child.