Businesswoman in Wheelchair Working on Estate Plan with Lawyer

Estate Planning for Disabled Beneficiaries

The Elder & Disability Law Firm, APC May 17, 2023

One of the main goals of estate planning is to provide for your loved ones when you’re gone. There are other aspects as well, such as having legal instruments in place should you become incapacitated and unable to manage your financial affairs or perhaps even voice your own medical treatment options.   

When you have a child or loved one who has special needs and will require government assistance, such as Supplemental Security Income (SSI) or Medi-Cal, if you leave them with cash or assets, their benefits could be jeopardized. Generally speaking, to receive government benefits a person cannot have more than $2,000 in assets.  

If you have a disabled family member and need to plan for their care when you’re gone, and you’re in or around Redlands, California, contact The Elder & Disability Law Firm, APC. An estate planning attorney can protect your special needs family members so they can receive government benefits for their care and well-being. The firm proudly serves clients in all neighboring communities, including Rancho Cucamonga, Riverside, and Palm Springs, California. 

Providing for a Family Member With a Disability After You’re Gone 

If, for instance, you have a child with special needs who is going to need government benefits after you’ve passed on, there are several considerations and steps to take. First, will the child need a guardian? If so, you must name someone in your last will and testament to be that person. As much as trusts may be needed in your overall planning, a will is the only instrument you can name a guardian. Otherwise, the court will have to appoint one.  

Second, and this is an important consideration, you must ensure that the special needs child can qualify for benefits such as SSI and Medi-Cal. In most cases, this means they cannot have more than $2,000 in assets. In other words, if you leave them $100,000, even in a life insurance payout, that will disqualify them. You have options to keep their assets at the qualifying level. 

Option 1: Disinheritance 

In truth it can have many pitfalls, but you cannot include the special needs child in your will. Instead, leave the assets to the siblings with instructions that they need to care for their disabled sibling.   

As for the pitfalls, the siblings will be under no particular legal obligation to do so. Instead, they could squander the money on themselves, even go bankrupt or lose everything in a divorce. It can be a pretty risky proposition. 

Option 2: A Special Needs Trust 

You can establish what is called a special needs trust. There are actually three types of special needs trusts. One is called a third-party special needs trust. This means that you, as the parents, can contribute to the trust, as can anyone else, whether family, friends, or otherwise, and the trustee you name will be able to distribute the funds to the disabled child on an as-needed basis.  

The distributions will not generally disqualify the child from government benefits as long as it is used for needs different from those provided by SSI and/or Medi-Cal. If the recipient passes away, the remaining assets can be distributed to others, and the government cannot seize them as repayment for benefits provided. Note, however, that these trusts cannot be established for anyone over the age of 65.  

A first-party special needs trust would be established in the name of the disabled individual. This option should be employed, for instance, if there is a lawsuit award or insurance settlement going to the special needs person. In such trusts, however, when the individual passes away, the government can make a claim on the remaining funds for repayment of benefits.  

A third option is a pooled special needs trust managed by a non-profit organization. A separate account is maintained for each beneficiary, but funds are “pooled” together for investment purposes. 

Helping You Focus on What’s Most Important 

If you have a special needs loved one, you must take extra legal steps to make sure they won’t be denied any government assistance they need. A special needs trust and a will are two vital documents, but for overall estate planning needs, you need to consider other legal options such as powers of attorney and an advance health care directive.  

Reach out to The Elder & Disability Law Firm, APC, for all your estate planning needs in or around Redlands, California.