Estate planning for a child or loved one with a disability is unlike any other type of planning and requires special care and attention. Perhaps your spouse or a child is disabled and dependent upon assistance provided through Supplemental Security Income (SSI) or Medicaid. Although leaving a disabled spouse or child money outright might seem like a good idea, it can actually cause the disabled person to lose his or her benefits. In short, without proper planning everything that you leave your disabled loved one could be taken by the government.
One way to help improve the quality of a disabled person’s life after you are gone is through a Special Needs Trust (SNT). The purpose of a SNT is to keep the assets in a form that will be available for the disabled loved one but will not disqualify them from the benefits for which they might be eligible and depend upon. The disabled person, or “beneficiary”, will continue to receive or enjoy the benefits of the trust assets through the Trustee and still be eligible to receive the government benefits.
While government agencies recognize SNTs, they have imposed very strict rules upon them. This is why it is vital that you consult an experienced attorney - not just one who does general estate planning, but one who is knowledgeable in SNTs and current benefit law!
Examples of impermissible trust distributions:
1. Paying for a service already paid for by another source;
2. Distribution not in the best interest of the beneficiary (made primarily for the benefit of another person).
Examples of trust distributions that will reduce SSI benefits include those spent on:
1. Basic shelter related expenses (i.e. rent or a house payment);
3. Basic items of clothing;
4. Cash payments to the disabled person for any purpose.
For a list of permitted distributions that will NOT reduce SSI benefits see: Permitted SNT Distributions.