Special Needs Parenting :: Why You Should Never Ever Leave Money Directly to Your Child With Special Needs
(in Certain Cases)
Parents of children with Special Needs must do double-duty. They are caretakers of their children for the remainder of their own lives, but they must also plan for the years after you are no longer here to care for them. What this means is they must have a solid financial plan - to not only leave assets which will go towards the care of their child with Special Needs but not jeopardize means-tested government benefits, and to assign someone to be the trustee of those assets.
Supplemental Security Income (SSI) is a means-tested based government program which provides monthly funds to those with little to no income or assets who also have a disability, blindness, or are age 65 or older. Before age 18, the qualifications are based upon the parents' income; however, after age 18, the consideration is of the person with a disability and looks at their assets as well as how their disability affects gainful employment. Should assets be left directly to a person with a disability, they would almost certainly not qualify for SSI. Additionally, if they are currently receiving SSI, they will automatically be disqualified for it based upon their assets climbing beyond the current $2,000 asset limit for individuals or $3,000 for couples. Once those limits are exceeded, they will lose their SSI. In the State of Texas, once someone receives SSI, they automatically receive Medicaid. To lose SSI is also to lose Medicaid.
So, what are some ways to assure a person with a disability retains their government means-tested benefits?
One way is to create a Third-Party Special Needs Trust and direct any accounts (bank accounts, life insurance, 401Ks, etc.) to name the Third-Party Special Needs Trust as the beneficiary. Multiple Third-Party Special Needs Trusts can be created; for example, in the case of a divorce, each parent can set up their own Third-Party Special Needs Trust. Grandparents can also have their own Third-Party Special Needs Trust for the benefit of their grandchild with Special Needs, should they want to provide for them for the future. These types of Trusts do not need to have an associated bank account at the time they are created, nor do they need to be funded until the death of the person(s) who created it. They can, in effect, lay dormant until such time as the parents are no longer living.
If your young adult is working, you can also create a First-Party Special Needs Trust which can be used for their earned money, Social Security back payments, child support, or possibly, a court Special Needs Trust.
A Testamentary Trust can be created within a Will and serves a similar purpose to a Third-Party Trust which is on the outside of a Will. They are both for the benefit of a third party and both have a trustee named who will look after the funds on behalf of the beneficiary. There are reasons why you may want to choose either the Third-Party Special Needs Trust or the Testamentary Trust within your Will. Your Estate Planning attorney can discuss the best recommendations for your family's situation.
A Testamentary Trust in your Will can be a Special Needs Trust, as mentioned above, or it can be a contingent trust which can take care of any inheritance that your neurotypical children under the age of 18 may inherit.
Should your child not be qualified to receive Supplemental Security Income due to excess assets, too much income, or another reason, the question of a trust created for the purposes of maintaining means-tested government benefits may not pertain to your family. A Special Needs Trust still may be a good idea to have if your child will not be able to handle his or her own finances.
For many families with children whose disabilities prohibit them from being able to care for themselves or make solid financial decisions, it's imperative that they never be the recipient of assets that will jeopardize SSI. Having a conversation with our knowledgeable attorney, himself the father and guardian of an adult daughter with Special Needs, will shed light on the specifics of these trusts which can provide for your child while retaining his or her benefits.
Reach out to attorney Boyd Handley, father of an adult daughter with Special Needs, to help navigate this important question. 281.703.3616