Planning for the future of a disabled child is a very important part of estate planning. Parents with disabled children must consider a number of special factors when drafting an estate plan to ensure the child’s inheritance does not affect the government benefits that he/she may be receiving.

How Can Receiving Inheritance Jeopardize a Disabled Child’s Government Benefits?

Disabled children are often eligible to receive several government benefits depending on a number of factors. Unfortunately, some of these benefits, like SSI and Medicaid, are based on financial needs. They have certain asset limits in place for the recipient. This means they can only have a certain amount of money in their name. If they exceed that limit, they run the risk of losing those benefits.

When a parent of the disabled child passes away, and the child receives inheritance as part of his/her parent’s estate plan, the inheritance could cause the disabled child to exceed the asset limit for the government benefits. This can cause the child to lose those government benefits — which are often vital to the child’s wellbeing and livelihood.

an inheritance could jeopardize a disabled child's government benefits

In order to avoid this situation, some specific planning needs to be done in the parent’s estate plan to make sure that whatever assets are left to the disabled child is done in a way so that the government benefits are protected. 

Establishing a Special Needs Trust Can Help Preserve Government Benefits

The most common way to avoid jeopardizing government benefits after receiving an inheritance is to establish a special needs trust. We can create a special needs trust for your disabled child and incorporate it as part of your estate plan. 

Rather than an inheritance going to the child directly, the funds would go to the special needs trust created for that child’s benefit. The government considers funds in the trust as an exempt asset — meaning, that funds in the trust will not be considered when determining ongoing eligibility for needs-based government benefits. By using a special needs trust, the disabled child’s SSI, Medicaid, and other disability benefits are preserved — and he/she can receive an inheritance without it affecting eligibility for government benefits.

a special needs trust can preserve disability benefits

Conclusion

If you have a disabled child or relative receiving government benefits and you’re planning to leave them an inheritance, make sure to give us a call. We can make the proper arrangements and establish a special needs trust for them so their government benefits are protected and the inheritance they receive from your estate plan won’t cause them to lose eligibility for any needs-based government benefits they may be receiving.