By Attorney Danielle Streed
Law Office of Redmond, Streed & Yokom
As the costs for caring for family members with a disability becomes more and more expensive and as the requirements for qualifying for government benefits becomes more strict, it is important for family members to carefully plan their estates. Social Security Income (SSI) or Medicaid benefits are rarely sufficient to cover many of the comforts and/or needs that someone with a disability may face. However, leaving money outright to a family member with a disability could effect his or her right to receive government benefits. In fact, if a disabled individual were to receive an inheritance outright, that individual could loose all government benefits immediately. The inherited assets would have to be used to pay for the things that SSI and Medicaid covered and once the inherited funds are depleted the disabled individual would be forced to go back and reapply for government benefits.
Fortunately, there are ways to leave money for the benefit of a disabled individual without giving them the money outright. A Living Trust can be set up by a family member (Trust Creator) and the Trust can provide that upon the death of the Trust Creator, the assets or a portion of the assets can be held in a Special Needs Trust for the benefit of the disabled individual. The Trust provides that funds can be used for the disabled individual, but it does not provide for outright distribution to them.
The Trust can provide that money can be used for such things as private rehabilitation, schooling or recreation, special trips and/or other comforts and luxuries. In other words, the Trust can cover all of the “extras” that the disabled individual could not otherwise afford based on the fact that SSI and Medicaid place the individual at the poverty level. The key to this “Special Needs” Trust is that the disabled individual has no control over the money. The Trust provides that a successor Trustee has full discretion with regard to distribution of Trust assets. The Trustee does not own the money, but neither does the disabled individual. The Trust is its own separate entity with a separate tax identification number and does not appear under the disabled individual’s social security number. Since the disabled individual does not own the money, the assets are not viewed as assets of the disabled individual.
With the “Special Needs” Trust the disabled individual can continue to receive SSI or Medicaid to cover food, clothing and shelter. If the disabled individual has any needs not covered by SSI or Medicaid, the Trustee can use Trust assets to pay for the needs of the disabled individual that are not covered by government benefits. Additionally, upon the death of the disabled individual, the Trust can further provide for distribution of those remaining assets to the disabled individual’s children or if there are no then living children, then it can be passed back to other beneficiaries of the Trust. A Living Trust lets you provide for the Special Needs individual who does not have the earning capacity of other children and at the same time ensure that what assets the disabled individual does not need or use pass back to the other family members. All of this planning can only be accomplished with a Living Trust. A Last Will and Testament would not allow you the lifetime control that is needed for a Special Needs beneficiary.