Carissa Giebel column: Providing for an heir with a disability
11:00 PM, Oct. 24, 2011
If you have a beneficiary (or potential beneficiary) with a disability, it's important to put together a carefully crafted estate plan to make sure he or she is provided for and any inheritance is structured so the disabled person won't disqualify for any benefits.
If a person has a disability that qualifies him or her for any federal or state benefits, such as Social Security or Medicaid, and that person receives an inheritance without proper planning, current benefits will most likely cease until the inheritance is spent. Then, the disabled person can reapply for the benefits they were on prior to the inheritance.
As a simple solution, some parents or grandparents will simply leave all their assets to the other children. Some may have a verbal agreement with the other children that they are to provide for their disabled sibling with the "extra" share they received. Either way, there is no certainty that your loved one with a disability will be taken care of.
A preferred solution is a spendthrift "special needs trust," or sometimes called a "supplemental needs trust." These are carefully drafted trusts created to provide for those things that are not available from any federal, state, or local government aid.
The assets in this type of trust are made to supplement any aid the beneficiary may be receiving. You, as the trust maker, can choose the things you want your beneficiary to receive distributions for, such as a college education, computer, transportation, recreation, etc.
A special needs trust can be set up alone or as a subtrust in another trust that also provides for the other beneficiaries. A special needs trust is intended to continue for the life of the beneficiaries, or at least until all the assets inside the trust are used up. This is why it's important to think carefully about who is named successor trustee.
A family member can be named as trustee, or if the value of the trust exceeds a certain dollar amount, a professional trustee can be named to act for a fee. If a family member or other nonprofessional is named as trustee, make sure that person understands the needs of the disabled loved one and has regular contact with the beneficiary. Also consider who should receive the balance in the trust, if any, upon the death of the disabled beneficiary.
Not everyone knows they will have a disabled beneficiary at the time of their death when they create their estate plan, which is why it's important to have some flexibility drafted into your plan to provide for a beneficiary in case there happens to be a disability someday down the road.
You may want to add a provision in your plan allowing your disabled beneficiary and perhaps their caretaker to live in your residence. If you go this route, there are many other considerations that will need to be thought through, including where the maintenance costs will be paid from.
The time and expenses involved in careful planning can make a world of a difference for a special needs beneficiary, or any other beneficiary for that matter. Make sure all your loved ones are provided for.
Carissa Giebel is an estate planning attorney and partner at Legacy Law Group LLC. She can be contacted at This email address is being protected from spambots. You need JavaScript enabled to view it., www.legacylawllc.com or (920) 560-4651.
