Kendall and Bexar County Estate Planning
Texas Estate Planning Blog
Well-meaning relatives may not understand that putting a family member with special needs in their will could put your family member’s lifestyle and future at risk, says the article “Protect benefits for children with special needs from Hoosier Times. Planning ahead is your best defense.
Individuals with special needs are eligible for a variety of government benefits and local programs that help with housing, medical needs, specialized equipment, independent living, job training and a variety of other services. Most of these programs are means-tested, that is, they require participants to qualify for benefits. If your loved one has no income and few assets, that’s not a problem.
However, when relatives, especially grandparents, include individuals with special needs in their estate plans or make them beneficiaries of insurance policies or retirement plans, they could put all of these benefits at risk.
Hopefully, relatives will keep you informed of their plans. You’ll need to be appreciative but firm and explain just how badly their generosity could backfire, if their gifts are not structured properly.
There is a way to leave bequests or make gifts to individuals with special needs that will not put their benefits at risk: a Special Needs Trust (SNT), either one that has been created already or one created for their gift. A SNT is designed to help people with special needs use financial gifts for different purposes, while maintaining their eligibility for services.
There are two types of SNTs:
First-party SNT—An individual with Special Needs, their legal guardian, or the court may establish a first party SNT funded by the individual’s own assets, either through earnings or an inheritance or a personal injury award. The first party SNT includes a “payback” rule: the trust must pay back the state for certain benefits, when the individual with special needs dies.
Third-party SNT—A relative other than the individual wishes to include them in an estate plan, so the relative or other person sets up a third-party SNT. The third-party trust is funded with assets from the relative or other person and no payback provision is required.
There are many issues involved in establishing an SNT, so the best person to set one up is an elder or estate planning attorney. You’ll also want to involve anyone in the family who might contribute to the trust, so they know what to expect and how they can participate, if they wish to do so.
Reference: Hoosier Times (March 4, 2021) “Protect benefits for children with special needs
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