Is your estate plan going to ruin an heir’s benefits?

On Behalf of | Jan 11, 2022 | Trusts |

When you create your estate plan, you know you have an heir with a lot of special needs, and so you plan to leave the bulk of your assets to them. You believe that this is the best way that you can help them even after you’re gone.

However, one unintended consequence may be that you disqualify them from the benefits that they’re currently receiving. 

It doesn’t take much. In some cases, just leaving a few thousand dollars may be enough to ruin their chances to get the benefits they were counting on. They’ll have to spend all of that money down first, and then they may have to reapply for things like Supplemental Security Income (SSI) or Medicaid. 

This can make the whole situation very complicated, and it essentially means that they quickly spend all of the money you left them and then get back on the benefits, so your assets don’t really assist them in any way.

What can you do?

If you want to avoid an outcome like this, one tactic is to use a special needs trust. Instead of giving the money directly to your heir, you just fund the trust and then dictate the ways in which a trustee can use that money to help them. This way, the money technically belongs to the trust and not the heir, so they do not get disqualified from their benefits.

Making sure that everything works out during this technical process can be fairly difficult, and you don’t want to make any mistakes. It helps to know exactly what steps you need to take so that you don’t overlook anything that’s contrary to your plans.