Justin, I have a grandson with special needs, and I’d like to provide for him after I die without hurting his ability to receive government assistance. What is the best way to do that? – George
George, People with special needs will often require life-long therapy and special living arrangements to live independently, so our clients often want to leave additional money for these family members. However, there are a few things to be aware of before making distributions to them.
Many state programs that benefit people with special needs have asset limitations. Money left directly to the special needs will often disqualify them for some of the benefits they are receiving. If they are not already receiving benefits, then these distributions may make it take longer for them to start receiving assistance.
To avoid this, some people leave money to a trusted family member with the understanding that the funds will be used for the special needs person’s care. This works as far as the assets not being counted against the special needs person, but there are other risks. For example, the funds are now subject to the family member’s creditors. The money could be lost if the family member got divorced, filed bankruptcy, or was sued.
The best way to leave assets to a special needs person is to create a Supplemental Needs Trust (SNT). The funds in the SNT won’t be counted as an asset, but can be used to enhance the life of the person with special need. Another benefit, a SNT can allow a family member to control the money, while providing protection from their own creditors. The rules for a SNT are strict, but it is the best of both worlds. It allows the special needs person to continue receiving benefits from the state while providing them with additional money for needs not otherwise met by their benefits and, even better, for the fun things in life.