Last week the Wall Street Journal‘s “Family Values” blog discussed the often challenging estate planning issues faced by families who are providing for a disabled loved one. Our New York estate planning lawyers know that more families are in this situation than some might suspect. The latest U.S. Census data shows that roughly 12% of the population has a severe physical or mental disability. When planning for the future it is particularly important for these families to closely consider how they want to leave assets to their heirs because of the effect that the asset transfers may have on their disabled relative’s access to public assistance.
Budget shortfalls are causing many state and local governments to cut support services to these residents. A common cost-cutting measure includes tightening income restrictions for those seeking to qualify for medical benefits and support services. As a result, it is vital that all families structure inheritances for disabled heirs so that they are not disqualified from the government help that they will likely need. Yet, research shows that two-thirds of parents and caregivers with disabled loved ones do not have plans in place to account for the long-term needs of these vulnerable heirs.
This is particularly unfortunate, because there are planning strategies that exist specifically to assist families in this situation. For example, a special needs trust can be used to leave assets to heirs with disabilities while ensuring that they keep government benefits like Medicaid and Supplemental Security Income (SSI). Before this trust was available parents were often forced to disinherit their disabled children lest they lose all their government support. Now, those who create a special needs trust can leave assets for the child’s use beyond that which they will receive from the government. Families can set aside funds for clothing, education, entertainment, household goods, healthcare costs, and many other future wants and needs for their disabled relative.
However, it is vital that a professional be consulted to help with this work, because there are potential complications with the use of these trusts. Our New York elder law estate planning attorneys remind local residents that direct payments to a disabled child will reduce SSI payments. Therefore all distributions from a trust to the child should be “in kind” or paid directly to the provider of the goods or services. Various other nuances must also be taken into account to ensure that the overall planning accounts for all possible contingencies and maximizes the benefit for the disabled heir.
See Our Related Blog Posts: