How a Single Provision in Your Will Can Protect a Loved One With Special Needs

 Posted on September 28, 2022 in Estate Planning

Have you ever worked closely with a loved one to help them apply for government assistance programs? If you have, you undoubtedly noticed that a large number of such programs have qualifying criteria that include limits on personal assets and income. Such requirements were generally put in place to ensure that the programs in question served those with the greatest need, but these limits have had unintended consequences for many families.

A good example of this is when a person who receives benefits through Medicaid, Social Security, and other income-limited programs is named as a beneficiary in another person’s will. It may come as a surprise to learn that a one-time transfer of assets—as is usually the case with an inheritance—could have a negative effect on the beneficiary’s continued eligibility for the government benefits on which they might have come to rely.

A Quick Look at Government Aid Programs

Government-funded aid programs are nearly everywhere today, and many have been serving citizens for decades. Some of them even trace all the way to the “New Deal” from the 1930s—the government-led effort to aid in recovery from the Great Depression. If you pay any attention to politics, you know that these types of programs are often debated, as lawmakers have trouble agreeing about their funding and future. It is almost impossible to deny, however, that government benefits are highly useful for people who truly need medical care and financial assistance.

If a government benefit program maintains an asset and income limit, even a small inheritance could alter the appearance of a participant’s finances dramatically. For example, if a person suddenly receives a $5,000 cash inheritance, that person’s bank account will probably look much healthier than it has in years. To account for such a situation, the federal legislature passed a measure in 1993 to create “supplemental needs trusts,” also known as “special needs trusts.” Through a supplemental needs trust, a person who receives government aid can also receive an inheritance without affecting their eligibility for their government aid programs. Rather than having the inheritance money go directly to the heir, the inheritance is placed under the control of the trust—and a named trustee—and the money must be used to pay for the heir’s supplemental needs.

Looking Ahead

When you are thinking about everything that you want to cover in your own estate plan, you might be aware that one (or more) of your intended heirs receives government benefits because of disabilities or other reasons. But what happens if you name someone as an heir who has no current disabilities but who becomes disabled between the time your will is executed and your death? Unfortunately, unless your estate plan accounts for this possibility, there is a good chance your loved one’s eligibility for benefits could be affected negatively.

Fortunately, you can easily account for a new disability or a similar development in your will. All it takes is a few short sentences in your will to instruct your executor to find out if any of your intended heirs have incurred or developed disabilities since your will was executed. If your executor discovers that an heir now relies on government aid programs, your will could instruct your executor to create a supplemental needs trust to receive that heir’s inheritance.

Get Help from a Texas Trusts Attorney

For more information about protecting your heirs’ eligibility for government aid programs, contact an experienced Fort Worth estate planning lawyer. Call 817-349-7330 to schedule a free consultation with a member of the team at Gonzalez Law, PLLC today. We can help you create a will that accounts for the possibility of needing a supplemental needs trust, even if the need for one is not currently apparent.

Source: 

https://www.forbes.com/advisor/life-insurance/special-needs-trusts/