HOW TO PROTECT YOUR DISABLED CHILD OR GRANDCHILD
One call I really hate to receive is “I am disabled, my parent has just passed away and besides everything else, I am going to be kicked off SSI.” In addition to the caller having to deal with the loss of his parent, he is in financial turmoil because anything his parents have left him will cause him to lose his disability benefits. The problem is, if you are disabled and receiving Supplemental Security Income (SSI), you can only have $2,000 of cash or investment type assets in your own name.
Many times the real tragedy of the situation is that the disabled child will also lose his or her medical coverage. That’s because if you qualify for SSI, you usually also qualify for Medicaid to pay for your medical expenses. So a small inheritance can have serious consequences for someone with schizophrenia, Asperger’s syndrome, autism, etc., and leave them worse off than if they had not received the inheritance at all.
The reason I dread the call is because if the parent had just done a little pre-planning the problem could have been avoided and I so wish I could “roll back the clock”. To keep from interfering with your disabled child’s benefits, all you need to do is include a “Special Needs Trust” in your Will or Trust.
A Special Needs Trust is designed so the assets you put in the trust for the benefit of your child do not disqualify your child from receiving his or her SSI and Medicaid benefits. The assets in the trust can be used to enrich your child’s life and make what is often a hard existence, because of the disability, a little easier.
However, if you do not plan ahead and your child receives their inheritance with no strings attached, all is not lost. When I get the panic call that the child is about to be kicked off SSI, I can still help but it is a much more complicated process.
If you do not include a Special Needs Trust for your disabled child in your Will or Trust, then federal law gives your child the right to create a trust for him or herself after your death. However, usually it has to be done by filing a lawsuit with the court, and requesting the judge to establish the trust – maybe only after a guardianship has been established. This time-consuming and expensive complication can be avoided if you plan ahead.
In addition, if your child has to go through the court process of setting up the trust for him or herself; then when your child dies the remaining trust assets have to be used to pay Medicaid back. If instead, you set up the trust before you die, anything that is left in the trust after your child dies can be used to help other family members. For this reason it is also important for you to create the trust while you are still living.
If you have a disabled child, grandchild, niece, nephew, etc., who will inherit when you die, do plan ahead so their benefits will be uninterrupted when you pass. It will make things a lot easier for your whole family – but especially the child with the disability.
Elizabeth A. Perry, a member of the National Academy of Elder Law Attorneys, has been helping Clark County residents with their estate planning needs for over 20 years. Her practice emphasizes wills, trusts, probate and Medicaid planning. You are invited to call her to schedule an appointment or sign up for a class at (360) 816-2485. ©Liz Perry 2015
(The above should not be construed as specific legal advice and is intended for general information purposes only)