Providing For Handicapped Heirs In Your Will With a Special-Needs Trust

A special needs trust can be used to help take care of a disabled loved one after your death without causing a loss of his or her public benefits.

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My client loved her child with severe Down’s Syndrome, so she left him nothing in her will.

Public Benefits for the Handicapped

Understanding of the law of public benefits means knowing the above was the most loving thing my client could have done. To see why, we must first understand that there are two kinds of severely handicapped individuals who don’t have to worry about their living expenses: the independently wealthy and the destitute. The former, of course, will have enough money to pay for a lifetime of medical treatments even if they are uninsurable (and most are) plus living expenses. The latter, on the other hand, qualify for Medicaid (and perhaps supplemental security income).

Where does this leave the majority of special-needs individuals – those who are neither rich nor dirt-poor? Because such individuals are both (1) uninsurable in most cases and (2) unlikely to become wealthy, it leaves them with an incentive to try to qualify for public benefits. But all such benefits are means-tested. Medicaid, for example, is only available to those with assets of $2,000 or less. (With some exceptions such as a home place, an automobile, certain life insurance, and certain funeral expenses. Ga. Code Ann. § 49-4-6(a) (1999)).

The Problem

Leaving money in a will or other transfer-on-death instrument to a special-needs individual will disqualify him or her from most public benefits. It will do so until such time as the inheritance is spent, which it tragically usually is – on medical expenses. Given the fact that Medicaid would have paid these expenses had the person never inherited, it is easy to see why leaving a large inheritance to a special-needs person is operationally no different from willing your money to the State of Georgia.

A Solution: Special Needs Trust

Enter the special-needs trust, often referred to as a “Medicaid trust.” A well trained estate planner can draft a testamentary trust that does two things. First, it technically leaves no money to the special needs beneficiary. This way, he or she will not be disqualified from public assistance for medical needs and certain living expenses. Second, the trust grants to a trustee (usually a professional fiduciary skilled in handling such a trust) the discretion to use the funds for the benefit of the special-needs individual.

Benefits

Funds in a special needs trust can be used for a wide array of the beneficiary’s needs, which may go to enhance his lifestyle in ways a mere testamentary gift would not. While SSI and Medicaid take care of basic needs such as food, clothing, shelter, and medical care, trust funds can be used for, among other things, private schooling, recreation, ball games, camping trips, rehabilitation assistance, or behavioral coaching to relate better to others. Though it cannot match the care of the deceased parent-provider, a special needs trust can ensure a quality of life for its beneficiary long after that provider’s death.

Application

Attorneys, financial professionals, and other estate planners do their clients a disservice if they are aware of special-needs dependents but do not refer them to an attorney who can help them plan. Up-front costs of a special needs trust are not great when the client considers that an entire inheritance could vanish if planning is not done.

Tanner Pittman, LLC is an estate planning law firm that regularly advises clients about the drafting and implementation of special needs trusts as well as a host of other issues, including Georgia inheritance law, probate, will contests, probate litigation, and testamentary documents such as wills, financial powers of attorney, living wills, and living trusts.

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