While making an estate plan, you may be trying to figure out the best way to leave an inheritance to a beneficiary who is chronically ill, has a disability or has some form of special needs. You want to ensure that your money can actually help them in the long term and that there will not be any unintended consequences.
Often, the best way to do this is to set up a special needs trust. You place the assets into the trust so that the beneficiary does not personally own them. But you can still choose a trustee who can use that money to cover necessary costs and help support the individual’s life, potentially for years to come.
Receiving government benefits
One thing to consider is that the individual may receive significant government benefits to help cover costs like housing or medical care.
Often, these benefits are only approved after the government looks at a person’s income and assets. They have to pass a means test in order to qualify.
This is why a direct inheritance can sometimes be problematic. If you left the money to them personally, it could increase their assets so that they no longer qualify for benefits, and they may have to spend those assets down before becoming eligible again. But by instead putting the assets into a special needs trust, the beneficiary may retain their government benefits, while still having access to their inheritance when needed.
Planning in advance
This helps demonstrate why a comprehensive estate plan is about much more than just writing a will. Planning in advance can help address complications and ensure that things go smoothly for your family.