There’s a lot of bad information on the internet that directs parents of children with special needs to completely disinherit their child in order to maintain his or her eligibility for government benefits such as Medi-Cal, Supplemental Security Income (SSI), and housing assistance. While such a blunt move would accomplish the goal of preserving government benefits, it is arguably the worst way to help a child with special needs.
Both Supplemental Security Income (SSI) and Medi-Cal are means-tested programs with very strict income and asset limits. This makes parents concerned about leaving their child an inheritance, as even a small amount of money over the eligibility thresholds could cause the child to lose health insurance and benefits for everyday survival. But this concern brings us back to a “chicken vs egg” debate. While SSI may provide a small cash benefit, it is not nearly enough to support a person with special needs for their lifetime.
The good news is that there is a legal tool that can help parents accomplish both of their goals through special needs planning: the ability to leave money for the long-term care and financial security of their child without causing ineligibility for any government aid that he or she was previously entitled to. That solution is a Special Needs Trust.
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The Special Needs Trust will hold assets for the child so that they are not legally in his or her name. The parent can then appoint a trustee who will be tasked with managing and overseeing the child’s funds. This can be the parent initially, and then the role may transition to a loved one or even a professional trustee when the parent is unable to serve due to age, their own disability, or death.
The goal is for the funds in the Special Needs Trust to supplement the child’s government benefits. The Special Needs Trust would cover expenses that enrich your child’s life such as recreational expenses, education, counseling, modifications to vehicles or homes, medical expenses not covered by benefits, and so forth.
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Special Needs Trusts can also receive life insurance payouts, so even if the parents do not have a ton of liquid assets during their life to put into the trust, they can still provide for their child with special needs when they pass away. Additionally, disabled individuals who don’t necessarily rely on government benefits can still benefit from Special Needs Trust as appointing a Trustee to manage the individual’s assets provides additional oversight and protects the child from financial abuse.
If you’ve received bad advice about disinheriting your child and you’ve created an estate plan that reflects that choice, we invite you to contact us today to discuss better options. Please call our office at (949) 333-3702 to schedule an appointment.
