If you’re the parent of a child with special needs, and your child receives government benefits because of his or her disability, then simply leaving an inheritance to your child through your will is not enough to take care of him or her. In fact, planning your estate in this way might do more harm than good.
Why? Because, as you know, your child is only allowed to have very limited assets. So, even if you leave him or her a small inheritance, say, $5,000, your child can lose essential benefits from the government. What happens is that the benefits stop while your child’s inheritance is spent on the things that Medicaid or SSI would normally cover. Then, when the inheritance is spent down, your child’s benefits resume.
What’s the biggest problem with this scenario? With a will, there’s no way for you to ensure that your child’s future involves care and comforts that aren’t provided by Medicaid or SSI. Most parents, during their lifetimes, provide a whole list of extra creature comforts and opportunities for their special needs child. With a will, there’s no way to make sure your child gets all of these “extras” once you’ve passed away.
The solution? A Special Needs Trust. This is a trust that’s established in strict compliance with the law, so that, after you’re gone, your child can continue to receive comforts, education, and other experiences that are above and beyond the basics covered by government benefits. With a special needs trust, your child does not receive a direct inheritance. Instead, the inheritance goes into the trust, and the trustee manages the inheritance on behalf of your child. So, your child can continue to have things like his or her favorite toiletries, extra medical care, educational materials, or vacations.
A word of caution: because of government regulations, you should get the help of an attorney experienced in Special Needs Trusts to make sure your child is protected. These trusts have to follow very specific rules, and one mistake can mean that your child essentially loses his or her inheritance.