If you care for someone with special needs, you know your loved one is someone special. It should come as no surprise that a loved one who needs special attention and care from you during your lifetime also requires a different treatment than others included in your estate plan.
Leaving money to someone who has a disability is a wonderful thing to do, but if not done properly, it can end up making them worse off. If your loved one is unable to support or care for themselves, they probably qualify for government benefits like Supplemental Security Income (SSI) and Medicaid. These programs, however, do not cover people who have the means to pay for their care out of pocket. So, if you leave assets to someone who would otherwise be eligible for benefits, they may lose the benefits and have to pay out of pocket until they run out of money. They may also be required to pay the government back for benefits they have received in the past the government provided, but now wants to recoup since there is money available.
On the other end of the spectrum are people with special needs who were specifically left out of estate plans because the family did not want to risk having them lose access to government benefits. This can be very hurtful, especially if the family and friends who do inherit are not as kind to your loved one as you were. Even beyond that, however, is the fact that government benefits only provide the bare necessities, and the quality of what is provided may be less than fantastic.
Thankfully, the government has approved an estate planning device that allows people to recognize their special loved ones in their estate plans without jeopardizing their access to necessary (and incredibly expensive to pay for out of pocket) government benefits.
A special needs trust is a trust that holds money for the benefit of a loved one with special needs. The money in the trust cannot be directly accessed by the beneficiary, so it does not impact their eligibility for benefits. The funds in the trust, however, must be spent on the beneficiary’s behalf.
The best part about these trusts is that the money can be spent of non-necessary, but life-enriching things. For example, if your loved one is a big football fan, the trust could purchase him or her tickets to a Carolina Panthers game for a special treat. On a more practical note, these funds can be used for extra medical care that government benefits don’t cover, or things like special food and regular haircuts.
If you have a loved one with special needs that you want to ensure is taken care of as well after you are gone as they are now, you need to talk to an experienced estate planning attorney about how to structure your estate.