Estate Planning Considerations for Disabled Children
November 29, 2019
Before leaving an inheritance to a special needs child, consider all your options. Disabled children who receive public assistance may be in jeopardy of losing it if they receive an inheritance. Special needs children may be eligible to receive Medicaid or Social Security Income. However, once they receive an inheritance, they may no longer be eligible to receive the same benefits. Furthermore, upon receipt of the inheritance, the government may seek reimbursement for payments made for medical care, housing, and other services provided.
Effective estate planning should ensure that the disabled remain eligible to continue receiving public assistance despite the inheritance. Special needs trusts are frequently set up to preserve their ability to receive such benefits.
Special Needs Trust
A Special Needs Trust (SNT) is designed for those who wish to continue receiving benefits while still inheriting. However, these trusts have strict requirements on how the funds may be used. Usually, these trusts set aside the funds for specific medical treatments and therapies that are not covered under the benefits. These trusts may also require that the funds remaining in the trust after the trustee has passed are given to the state. Therefore, setting up a trust may not always be the best option.
There are different types of special needs trusts to consider. Third party SNTs are created by a third party for the disabled person, while a First Party SNT is created by the disabled person for their own sake. Both types allow the beneficiary to continue receiving benefits while keeping their inheritance. However, each of these trusts comes with restrictions and penalties that should be taken into consideration when evaluating the estate and inheritance.
Achieving a Better Life Experience Act of 2014
The Achieving a Better Life Experience (ABLE) Act of 2014 allows disabled persons to save for disability expenses without losing their assistance program benefits. NY ABLE allows deposits up to $15,000 yearly into the account without losing other government funding. These funds can be used for expenses, including legal costs, assistive technology, and funeral and burial expenses.
Depending on the amount of the inheritance, it may be prudent to forego government benefits. If the inheritance is substantial, it may be more beneficial to simply use the inheritance to pay for medical care and other costs through the inheritance. Establishing a special needs account may be too restrictive and limiting on how the funds are utilized.
Another option may be to utilize the inheritance to pay for a home, vehicle, or other exempt resource that still allows the beneficiary to retain government benefits. Spending the money inherited properly may be the most effective way to preserve benefits and still use the inheritance.
Brooklyn Estate Planning Lawyers at Korsinsky & Klein, LLP Guide Clients Through the Estate Planning Process
If you need help with estate planning for a disabled child, contact the Brooklyn estate planning lawyers at Korsinsky & Klein, LLP today. We can guide you through the entire process. Located in Brooklyn, New York, and Lakewood, New Jersey, we assist clients throughout Manhattan, Long Island, and Westchester, New York. For an initial consultation, call us at 212-495-8133 or contact us online.