Protecting an Inheritance for a Child or Grandchild With Special Needs
It is necessary to plan properly when caring for a family member with special needs, especially regarding inheritance. Parents and grandparents often wish to leave something for their children or grandchildren to take care of their future. Unfortunately, in some cases, leaving an inheritance may lead to undesirable effects.
In cases where an individual receives certain assistance from the state through means testing for Supplemental Security Income (SSI) or Medicaid, a direct inheritance may affect eligibility for those crucial social services.
The risk of leaving assets directly
Government support programs usually impose a stringent cap on the total number of assets a beneficiary can possess. If a person with special needs receives a sudden inheritance without proper planning, the assets can become an obstacle to qualifying for these programs.
As a consequence, the individual stands to miss out on important government aid that would cover their medical expenses, living quarters, and other necessities of life. Even a modest inheritance can become a source of serious trouble without appropriate structuring.
This is precisely why the families need to think twice before deciding how to pass their property on to a family member with special needs.
Understanding special needs trusts
The best way to safeguard the inheritance is through a special needs trust.
This trust stores funds for the benefit of the person with disabilities but enables their management by a trustee. As the beneficiary will not have ownership of these funds, they will not be considered when the government benefits check for any asset limitations.
The trustee may use trust funds to improve the beneficiary’s life by paying certain costs that are not usually covered by the government.
These costs include things like education, transport, recreational services, and personal items, among others.
Choosing the right trustee
Choosing a trustee is a key step during the planning process. The trustee should manage the asset, make payments from the trust, and ensure that the funds are used in accordance with the requirements.
A family can select one of their relatives, friends, professionals, or banks for that position. A good candidate should know how to manage the trust properly, taking into account the beneficiary’s needs.
Given the specific nature of special needs trusts, seeking help from a professional is a good idea.
Coordinating beneficiary designations
When planning the estate of someone with special needs, one must go beyond just preparing a will.
Beneficiary-designated items, such as life insurance, retirement plans, and so forth, must be considered. Making a person with special needs the designated beneficiary may run counter to the intended purpose of the entire estate plan.
These types of assets might have to be transferred into the appropriate special needs trust.
Talk to a Virginia Beach, VA, Estate Planning Lawyer Today
The Law Office of Angela N. Manz represents the interests of Virginia Beach residents looking to create or revise an estate plan. Call our Virginia Beach estate planning lawyers today to schedule an appointment, and we can begin discussing your next steps right away.