For most families, public benefits are a part of the solution. Many public benefit programs (like Supplemental Security Income (SSI) and Medicaid) are only available to people with very limited financial resources. These programs focus on providing basic needs – medical care, food, and shelter. They often do not provide “extras” like clothing, televisions, computers, cable and internet access, transportation, books, tutoring, travel and education. If these “extras” are to be available, the family must provide them.
Because of the expenses that come with caring for a person with special needs, well meaning family members often want to contribute by giving financial gifts directly to the disabled individual. Such a gift, even if given in a will or received through inheritance, could jeopardize benefits by making the special needs person financially overqualified for the programs that provide basics needs. In the past it was believed the best estate planning strategy was to disinherit special needs family members so that a gift through a will or inheritance would not cause disqualification. Disinheritance is an outdated and incorrect approach; although it may preserve benefits, it leaves no way to provide the things that elevate mere existence to living a rich life. If disinheritance is not the answer, what is?
A special needs trust (SNT) can hold assets on behalf of a disabled person without affecting their ability to receive benefits. SNTs are often referred to as Supplemental Needs Trusts because their purpose is to supplement the services and funding available through public benefit programs, but not to replace them. Use of assets in the trust to purchase or replace items or services made available through programs with eligibility requirements, (referred to as means-tested programs) can cause a reduction or total loss of benefits; therefore, the use of SNT funds are strictly regulated. Once created, SNTs can safely receive gifts from friends and family alike, without risking a carefully developed benefit plan.
In most cases, one or more SNTs will serve as the foundation of an effective plan designed to maximize options available for those with disabilities. Families of modest means, and those of great wealth, can use SNT planning to great advantage as part of their overall estate plan. The planning includes choosing the right trustee, determining whether a guardian will need to be appointed, knowing whether to use a first or a third party SNT, coordinating the planning with public benefits, and determining how much to leave to a special needs beneficiary. Friends and family need to be informed so that their well intended gifts can be safely routed to the SNT to prevent unintentional loss of benefits to the disabled family member.
Securing the future of loved ones with disabilities is not easy. It requires the assistance of a team of professionals with the expertise to address all aspects of the individual’s current and future care. An essential member of this expert team should be an attorney who specializes in the countless issues implicated by the disabling condition of an heir or other intended beneficiary under a family’s estate plan. In the end, that’s not just peace of mind now, but the assurance of a happy life for your loved ones who cannot take care of themselves.
James M. Miskell received his law degree from the University of Georgia in 1993. His Asset Protection and Estate Planning Law practice is located in Lawrenceville, Georgia. He offers free educational workshops and consultations to assist clients as well as fellow professionals in creating individualized solutions.