Parents of special needs children must plan carefully for their children’s lives after the parents are gone. If there is an inheritance in the future, means-tested benefits could be lost, unless proper planning takes place.
Parents who have devoted their lives to providing care to disabled adult children worry about what will happen when they are gone. If an adult child depends upon support services provided by Medicaid, a Supplemental Needs Trust may be needed to ensure that any inheritance does not put those services at risk.
Kiplinger’s article, “How to Plan Ahead for a Disabled Child’s Inheritance,” notes that, without a controlled environment and attentive support system that parents carefully construct and protect, a special needs child’s lifestyle and comfort zone may fall apart.
Many of disabled children are entitled to means-tested benefits, like Medicaid or a Medicaid waiver program, Supplemental Social Security Income, Supplemental Nutrition Assistance Program, the Housing Choice Voucher Program and other services essential to their support system.
The issue for many of these parents is to ensure that their children will sustain their secure and protected lifestyle, without losing eligibility for essential means-tested benefits or having someone take advantage of that child when the parents pass away. With the help of a qualified estate planning attorney, parents can direct the inheritance of a child with special needs to a Supplemental Needs Trust. A Supplemental Needs Trust is a federally-approved strategy that will shelter those funds from creditors, secure the funds against waste and malfeasance, and exempt such funds from income and resource limitations, so the child can access the programs that will help ensure a productive and enjoyable life.
To qualify, a Supplemental Needs Trust must serve just one beneficiary for life. It must include specific terms and legal references, provide certain trust powers and limitations, and weigh the loss of eligibility against the benefit of each non-supplemental distribution. The various federal and state programs usually cover housing, food, utilities, medical care and medicines. A Supplemental Needs Trust can pay for all non-covered medical, ophthalmological and dental care, private rehabilitation training, services, devices, supplementary education assistance, entertainment, hobbies, transportation and personal services.
The rules governing trust distributions are very strict. Structuring a successful Supplemental Needs Trust requires an estate planning attorney who is experienced in state and federal program laws, with a very solid understanding of the state office’s interpretation of the regulations and local program directives, as well as an informed relationship with the local program decision-makers. He or she should also stay on top of changes in the law, by attending continuing legal education courses.
Naming a qualified successor trustee is also an important part of planning for the future. The successor trustee will need to understand that public assistance programs can be challenging to navigate, must understand how the trust works and know when they are in over their head and need the help of an estate planning attorney. They must also know when and how to make distributions that are in the best interest of the beneficiary and in compliance with the rules for the trust and for government benefits.
If you or a loved one would like to learn more about the valuable benefits offered by a Supplemental Needs Trust, contact the Soto Law Firm today to schedule your free consultation.
Reference: Kiplinger (May 16, 2018) “How to Plan Ahead for a Disabled Child’s Inheritance”