Families with disabled children have special estate planning considerations to ensure those children are taken care of without risking a loss or reduction in benefits.
We frequently have clients say they want a plan that disinherits their disabled child and leaves everything to another child who will take care of the disabled child (the “caregiver child”). This plan has good intent and does ensure that the disabled child doesn’t lose her benefits, but there are several negative consequences to doing this. One problem is that it puts the disabled child’s inheritance at risk in the event the caregiver child has any type of legal problem—the inheritance could be lost to a bankruptcy, divorce, or lawsuit. The disabled child may also feel left out of your plan and like she didn’t receive anything. Another consideration is that, although everyone wants to think the best of their children and hopes they will carry out their wishes when they die, this is not always what happens. If you leave everything to the caregiver child and instruct him or her to take care of the disabled child, there is nothing that requires the caregiver child to carry out that plan. The caregiver child may get in a dispute with the disabled child or may just find themselves in a situation where they need money. It creates a stressful, uncertain outcome that isn’t necessary.
There is a much better option available that will allow you to leave your disabled child an inheritance and let her keep her benefits. You can set up a supplemental needs trust (SNT) and name your disabled child as the beneficiary. Your disabled child will not receive her inheritance outright—you will appoint someone to be the trustee of her SNT who can use the funds to pay for her needs that are not covered by her benefits. The assets in the SNT are not considered countable for determining qualification for government assistance. This option gives you the ability to leave each of your children an inheritance, protect government benefits, and remain eligible for potential benefits in the future.
