If you have minor or adult children (or non-child beneficiaries) who are either receiving government benefits currently, or may receive them in the future due to a mental or physical disability, then you need to know about special needs trusts. These trusts are certainly important enough to spend the next two posts discussing them.
These types of trusts are much more well-known than they were just a few years ago, but I find that too of my clients are not familiar with them. The most common disabilities among my clients' beneficiaries are conditions like autism, down syndrome, Alzheimer's and mental retardation, but special needs trust planning is usually vital regardless of what the specific disability may be. If there is a chance that your beneficiary may not be able to support himself/herself if you are suddenly not there to help out, then you need to at least discuss special needs trusts with an estate planning attorney.
When we talk about government benefits for the disabled then we're usually talking about Medicaid (Title 19), which covers basic medical care, and SSI (Supplemental Security Income), which covers basic food, clothing and shelter needs. These types of benefit programs have asset limitations: $1,600 in Connecticut for Medicaid and $2,000 for SSI. In other words, anyone with assets that exceed these limits are ineligbile and must spend their assets down on their care until they are under the asset limits, at which point they can apply.
So...this means that if you leave an outright inheritance to a disabled beneficiary then you are likely doing them a disservice. The inheritance will either render them ineligible for the government benefits they are already receiving or it will make it harder for them to qualify in the future because there are suddenly more assets that need to be spent down.
In tomorrow's post I'll explain how these important trusts operate and why they are usually the best option for disabled beneficiaries.