“You mean I don’t have to disinherit my disabled son?”
I heard this from a client the other day, and it got me thinking. There are so many misconceptions about planning for the wellbeing of disabled dependents. This client, like so many others I see, was genuinely surprised to learn that you don’t have to impoverish a disabled dependent for that person to continue receiving public benefits.
The legal tools that make this possible—collectively called Special Needs Planning—give you a powerful way to provide for disabled dependents, yet many people have no idea these tools exist.
So, let me bust this myth once and for all. You DON’T have to disinherit your kid to keep the public money flowing. I’ll explain how in a moment.
First, let me give you some context.
Let’s say you have a child or grandchild who has a physical, emotional, or intellectual disability. Because of this disability, the child is eligible for government benefits such as Medicaid, Social Security, rental assistance, health care coverage, and other benefits, either now or in the future. There’s just one catch. To qualify for this public assistance, the child must meet strict financial eligibility criteria.
Inheritances create problems for people with disabilities who rely on public benefits for their wellbeing. The concern is that if the child receives an inheritance, either now or in the future, the child will no longer meet the financial eligibility criteria. The child will lose those government benefits, which could mean losing their doctors, their rent assistance, and whatever continuity they had developed in their life up to that point.
Years ago, before the advent of Special Needs Planning, disinheriting a child was the only way to keep him or her eligible for public assistance. Some families would attempt to skirt the rules by giving the disabled person’s inheritance to another family member to manage. The assumption was that this other family member would use the funds to provide for the person with disabilities. Though this option sounds good in theory, it rarely worked well in real life. What happens if the family member decides to blow that money on something else? What happens if the family member dies first? What happens if they are a party to a divorce? What happens if they have creditor problems? That money disappears, leaving the person with disabilities high and dry.
Special Needs Planning solves this problem by creating protected containers for funds that will be used to give the disabled person comforts that government programs don’t cover. They do this without jeopardizing the person’s eligibility for public benefits. When they receive their inheritance, that money goes into a special trust that someone else manages for their benefit, and they can continue to receive government benefits without any disruption.
The legal tools in the Special Needs Planning toolbox can be adapted to fit any family situation. For example, one client has a grandchild who has autism. This child isn’t eligible for government programs now because she still lives at home with her parents. However, my client knows that there may come a time in the future when this grandchild is out on her own. She may need some assistance, and the grandparent wants to provide that support without hindering her ability to qualify for government benefits if she needs them later.
I also have a few clients whose disabled adult children are still living at home with them. These parents are planning for the day when they will no longer be able to care for their children. They want their children to continue to live comfortably, so we created Special Needs Trusts for those older adult children so that they could remain eligible for the government benefits without losing the comforts their parents were able to provide.
There are as many scenarios as there are people. In no scenario, however, do you have to disinherit your child. With the right Special Needs Planning, your loved one can have the best of both worlds.