Justin, I have a son who has down syndrome. I want to make sure he is taken care of when I die, but I don’t want him to lose his disability payment. Should I disinherit him and leave everything to the person I want to take care of him? – Mary
Mary, I hear that question a lot, and it is very important to think of ways to benefit your son without giving him an outright distribution when you die, because the increase of his assets would jeopardize his disability payment. Sadly, some people only know of the option of disinheriting a child. This option does ensure that your son does not lose his benefits, because he doesn’t receive anything.
However, there are several downsides to this option. The person you give everything to could decide to not follow your wishes and keep all of the assets for himself. Or, the more common threat, the person you gave all the assets to goes through a divorce or a bankruptcy, or is sued, and now the money you wanted to benefit your son is going to the ex-wife of his caregiver.
There is a much better alternative to this option—you can leave your son his inheritance in a Special Needs Trust. This trust would allow you to name whomever you would like to manage your son’s inheritance as his trustee, but the inheritance is still your son’s, held in trust for his benefit. This trust is very restrictive on how the assets can be used, but it allows your son to keep his disability payment and his inheritance.