Americans who have special needs are the largest minority in America, 58 million strong. There are many different federal and state benefits available to help people with special needs. Many of them have strict financial requirements, setting income and asset limits on applicants.
What can go wrong?
Well-meaning family members can sometimes create problems for their loved ones when they are trying to help. This can happen several ways:
- Leaving an outright bequest to their special needs loved one. The bequest may push the special needs family member’s assets above the limit, causing them to lose critical government benefits for a period of time. This also creates a significant paperwork hassle, as the recipient must then reapply for benefits.
- Giving a special needs person’s inheritance to a sibling, counting on that sibling to take care of the special needs person. While this seems like a simple solution, it is dangerous. Some siblings may not be as reliable and trustworthy as we would like to believe. Others may lose the money through problems in their own life, such as divorce, bankruptcy, or lawsuits.
- Creating a crowdfunding campaign, through sites like GoFundMe. Similar to receiving an inheritance, receiving donations through a crowdfunding campaign can also put the special needs person’s assets over the limit, causing them to lose government benefits.
- Creating the wrong type of trust to benefit their special needs loved one. Savvy parents of special needs children often know that they should create a trust for the benefit of their special needs child, but they don’t realize that there are many different types of trusts. Cash-strapped families may choose to use online estate planning software, or other low-cost document preparation options. They don’t realize that document preparation is only about 20% of an estate planning attorney’s work. In order to create good documents, the attorney must spend much more time getting to know your family dynamics, financial situation, and anticipated future needs. Only then can the attorney decide which documents to write, and how to write them.
What to do?
Plan ahead! There are several ways to provide for your special needs dependent and stay within government guidelines for additional benefits. One of the best ways is to establish a special needs trust that has the specific purpose of supplementing federal and state assistance programs. By doing so, a disabled loved one can benefit from government programs, and have additional money to supplement what those programs provide.
There are strict rules when it comes to creating special needs trusts for a disabled family member. There are also restrictions on what the money can be used for. We can help you determine what type of trust is best based on you and your loved one’s particular circumstances. Give us a call at your convenience to set up a time to discuss your situation further.