Parents or grandparents often leave money to their child or
grandchild, perhaps in a will or trust, or they set up an account payable to
the child once he or she reaches the age of majority. Many times, well-meaning parents or
grandparents are particularly interested in leaving money to their child or
grandchild who has special needs. Leaving money or assets outright to a
beneficiary who has special needs might do more harm than good. Why?
If someone has “special needs,” they often have needs that
are too expensive to be paid using private funds. Examples of these expenses include medical
attention, therapy, medical equipment, and assistance with food, shelter and
clothing. Various agencies provide
resources to a person with a disability to meet these needs. Many of these resources are “means tested,” requiring
that applicants for these resources not have the means to pay for these
expenses themselves. Two major resources
are Medicaid and Social Security Income (SSI).
If a well-meaning grandparent leaves a sum of money in a will for a
granddaughter who is disabled and receives Medicaid, Medicaid will count that
inheritance as a resource and may disqualify the grandchild for Medicaid until that
inheritance is spent down. Most states
require that an applicant have no more than $1,500-2,000.
One vehicle of special needs planning is the special needs trust (SNT). With a SNT, a trustee manages trust assets for the
benefit of a beneficiary who has special needs.
There are different types of SNTs for different situations. Using a SNT, money can be left for a child with special needs without jeopardizing that child’s
eligibility for government assistance.
If you would like to leave money in your estate plan or in an account for someone who has special
needs, please check with a special
needs planning attorney beforehand, so that you do not do more
harm—disqualifying that person from receiving government-funded assistance—than