Leaving a Legacy for Your Disabled Child
Your Children with Disabilities Will Become Ineligible for Benefits…
Unless You Act!
By James L. Cunningham Jr, Attorney at Law
Parents of children with mental or physical disabilities face a variety of challenges in ensuring their children can successfully navigate life with and without them. Because people with disabilities are living longer due to advances in healthcare and other enabling strategies, they are increasingly outliving their parents. This necessitates that planning for their future care should begin as early as possible, especially with respect to estate planning. In most instances, leaving even a moderate-sized inheritance outright to a loved one with special needs will result in that person becoming ineligible to receive government benefits such as Supplemental Security Income (SSI) or Medicaid medical coverage. Enter the Special Needs Trust. Because the assets are controlled by the trust rather than the child, the child may benefit from the assets in their trust without losing eligibility for their deserved government benefits.
Understanding a Special Needs Trust
The future of children with a disability is less stable than those without, and they may be looking at a future of lifelong help. Because many of these individuals may not hold a job that gives them access to health insurance, coverage under Medicaid is critical when they are no longer covered by their parents. Medicaid is only available to people who have very limited income and resources. Hence, an inheritance leaving money directly to the individual will disqualify them from Medicaid.
With a Special Needs Trust, the assets are placed in trust for the benefit of the special needs beneficiary. This person doesn’t have control over the trust funds—they are under the control of the trustee the parents chose. Because of this structure, the funds are not viewed as a resource of the beneficiary and can therefore be set aside to pay for other expenses besides healthcare, food, clothing, and shelter. Examples of qualifying expenditures out of the trust are a motorized wheelchair or specially-equipped van, household furnishings, educational pursuits, or even some entertainment-oriented purchases.
A Special Needs Trust is organized like other trusts in that there is a settlor (or grantor) who creates the trust, a beneficiary (in this case the person with special needs), and a trustee who is responsible for managing the money for the person with special needs. You should consider choosing someone who really understands the needs of your child and who you can trust wholeheartedly.
The Trustee’s responsibilities include:
- Manage and invest trust funds in accordance with the terms of the trust document and state law
- Spend trust assets only for the beneficiary
- Understand the SSI and Medicaid laws to not run afoul of the government benefits
- Keep careful records of all spending
- File federal and state trust tax returns
- Decide how to use trust funds to meet the beneficiary’s ongoing needs
Taking The Right Steps
A Special Needs Trust has complexities, so be sure to partner with an estate planning attorney who understands the nuances of setting up the trust properly and can educate the trustee as to their responsibilities. If you have a beneficiary of ANY AGE with special needs, you should consider a Special Needs Trust. CunninghamLegal has certified specialists in estate planning, trust and probate law who will listen to your unique needs and put a plan in place that makes sense for you and your family.
We invite you to contact us any time for an appointment with our legal and tax experts to talk about creating a Special Needs Trust. We have offices throughout California, and we offer in-person, phone, and Zoom appointments. Just call (866) 988-3956 or book an appointment online.
James Cunningham Jr., Esq.