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Many families (erroneously) disinherit a disabled child, believing that this is in the child’s best interest and instead leave assets to other family members so that they can care for the disabled individual. Even with the best of intentions, circumstances may arise in their lives that could directly affect their ability to provide for a disabled family member. For example, if the family member gets divorced, predeceases the caregiver, or has creditor issues, the disabled child’s share would be at risk. Instead of disinheriting a disabled child, best practice is to create a third party supplemental needs trust.
Protecting SSI and Medicaid Benefits for a Disabled Child
Chances are high that a disabled individual will need the inheritance when the caregiver passes away. The best way to protect a disabled individuals government benefits, such as Supplemental Security Income (SSI) and Medicaid benefits, is to leave their share in a Supplemental Needs Trust for their benefit. This can be done by leaving assets in a supplemental needs trust in a last will and testament. The trust specifically forbids the trustee from dispensing any benefits to the disabled individual which would jeopardize SSI or Medicaid benefits.
Supplemental Needs Trusts in New York State
The Supplemental Needs Trust assets can be used to enhance and enrich the lifestyle of the disabled individual making it unnecessary to disinherit and/or impoverish the individual for purposes of maintaining crucial government benefits. This type of trust is meant to supplement rather than supplant government benefits. The trustee may not make any direct payments to the disabled person and may not use the funds of the trust to pay for anything that the government benefits already provide. All distributions from the trust have to be made to the provider of services, not outright to the disabled person. For example, the Supplemental Needs Trust can pay for summer camp, a computer, car service, clothing, a vacation or a van. This greatly improves the disabled person’s life without the loss of necessary government benefits.
A trust created by a caregiver using the caregiver’s own funds, is a third-party Supplemental Needs Trust. This means that the funds used to create the trust would never be considered the disabled individual’s own funds. Upon the disabled person’s death, the balance in the trust can be distributed to anyone that the creator of the trust names as a contingent beneficiary.
Estate Planning for a Disabled Child
If you have a child with any level of disability, you should consult with an attorney who is well versed in the area of special needs planning to further discuss the benefit of leaving that child’s inheritance in a Supplemental Needs Trust in your Will.
