Although estate planning is important for all families, it is especially critical to plan ahead for beneficiaries with disabilities. Failure to do so can set off an unintended chain of consequences that can be hard to reverse. Experts offer advice—and spell out mistakes to avoid.
Understand Public Benefits
When planning to designate assets for the benefit of a loved one with special needs, it is important to first learn about the income requirements tied to public benefits they may currently be receiving—and forecast for those they might need down the road. Failure to understand how an inheritance can impact the receipt of necessary public benefits is a mistake frequently made by well intended relations. As The News Enterprise explains:
The most common result of a failure to plan specifically for disabled beneficiaries is the beneficiary receiving an outright distribution of inherited property. If a simple will is used, or no will exists, the beneficiary will receive the inheritance, regardless of any public benefits that he or she is receiving. This inheritance most likely will disqualify them from any benefits based on financial eligibility. It can cause a disruption in medical benefits and care and can result in loss of the inherited assets.
Similarly, if the disabled beneficiary is not currently receiving public benefits, many people wrongly assume there never will be a need for them. After the death of the parent, however, public benefits may no longer be optional. Disabled beneficiaries often receive benefits that are not based on financial eligibility, but later in life find that more robust benefits are needed.
It is also best to avoid naming a caregiver as a beneficiary in a will, in hopes that inherited funds will be used to assist a family member with special needs. Legal experts point out that since the funds then legally belong to the caregiver, there’s no guarantee that they will be used as intended. Even when there is no ill-will intended, life can take surprising twists What if, for example, a tragedy strikes the caregiver?
Establish a Trust
To ensure that funds can be distributed to a special needs beneficiary over time, without interfering with public benefits, lawyers recommend establishing a trust. A Supplemental Needs Trust (SNT) can be especially useful. As the National Law Review explains:
This specialized trust allows assets that family members and friends contribute to it to pay for goods or services that are in the beneficiary’s best interest, while also maintaining the beneficiary’s eligibility for means-tested government assistance programs. In planning for an individual with special needs, money is not everything — there may be residences or programs that require the person with special needs to be eligible for benefits such as Medicaid or SSI and do not accept private payment. A SNT allows the beneficiary to have the best of both worlds.
When you work with a lawyer to create the trust, you’ll appoint a trustee to manage and distribute the assets. You can include specific details about how you wish for this to be done, and other expectations for the trustee in the trust agreement. You can learn more about the trustee role related to special needs trusts right here.
Given the fiduciary responsibilities undertaken by trustees, the trust agreement may require procurement of a trustee bond. A trustee bond is a type of fiduciary bond that helps to protect the interests of the trust and beneficiaries by guaranteeing the faithful performance of a trustee in accordance with the law. As a leading national provider of many types of fiduciary bonds, Colonial Surety makes it easy and efficient to obtain a trustee bond. Just get a quote online, fill out the information, and enter a payment method. The bond can be printed or e-filed from anywhere.
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