Well-intentioned friends or family members often choose to leave an inheritance to a loved one with special needs. They may wish to help provide for their loved one’s longterm care or simply allow him or her to pursue hobbies or splurge on a vacation.
Unfortunately, despite their best intentions, that gift may backfire. For example, an outright gift or inheritance may disqualify a person receiving Medicaid or SSI from critical benefits. Instead of using the inheritance to enrich his or her life, the recipient must now use that money to support him or herself or pay for medical care during a “penalty period” until benefits may resume.
This is the last thing anyone would want to happen. Proactive planning, such as establishing a third-party Special Needs Trust, eliminates this issue. Special Needs Trusts allow an inheritance (or other gifts) to enhance the person’s life while also maintaining eligibility for certain benefit programs.
The trust can provide funds for things like vacations, additional therapies, trips to the movies, mobility devices, specialized clothing/footwear or books, and hobby materials. A Special Needs Trust is not a blank check, however. Money in the trust must be spent for the beneficiary’s sole benefit. So while the trust can pay for the beneficiary (and potentially, a caregiver) to go on vacation, it may not pay for the rest of the family to go as well. Additionally, the beneficiary may not manage or control the money. The trust must be managed by a trustee who oversees all distributions and ensures that they comply with Federal and state regulations.
Because each person’s needs are unique — and because each benefit program has certain exceptions — it is imperative to consult with an attorney to ensure that a gift doesn’t become a curse.