Use a Special Needs Trust to Prevent Disinheriting Disabled Children

All too often, parents exclude their special needs children from their estate plan because they believe that if the child inherits property, they will be ineligible for government benefits.

To preserve the child’s government aid, parents sometimes provide nothing to the child with special needs while giving substantial amounts to the child’s siblings, expecting that the siblings will provide for the disabled child. A recent court case highlights the trouble this planning strategy can lead to.

The case (found here) involves a parent who gave $51,000 to each of her children, except a daughter who was born with significant disabilities and who had received public benefits for years. To one child, however, the parent gave approximately $102,000, or twice as much as the other non-disabled children. Though the parent never formally stated why she gave this child twice as much as the other children, it is easy to assume that perhaps half of the funds were meant for her disabled child.

Years after the parent’s death, one of her daughters claimed that the extra money that her sibling received was intended for the sibling with special needs.  The courts ultimately dismissed the daughter’s lawsuit.

Many parents who are faced with this situation do exactly what the parent in this case did – simply exclude their special needs children from lifetime gifting programs. A gift of a significant amount of money may prevent a child from receiving benefits from the government. Sometimes, parents will also give more money to their other children with the hope that they will take care of the child with disabilities, which was unfortunately not done by the sibling in this case.

Fortunately, there are ways to ensure that gifts do not prevent children with special needs from receiving government benefits. There is no reason to exclude a child with special needs when it comes time to make gifts.

The solution is to create a special needs trust and fund it with the gift while the donor is still alive.  Working with a qualified special needs planner to draft an appropriate trust for your particular situation will ensure the well being of your special needs child. The money held by the trustees won’t affect a special needs child’s ability to qualify for government benefits, and the child will be able to enjoy the benefit of the funds sooner, just like her other siblings.

If you are thinking of making gifts to children or other relatives or friends, and one member of the group has special needs, talk with your special needs planner prior to making the gifts.  Your planner can construct a plan that includes everyone, even the person with special needs, and will ensure that your loved ones receive the funds and assets as you intend.

All your children should be able to receive gifts equally. Protect your special needs child by drafting a special needs trust and planning ahead!  Contact your estate planning and special needs trusts attorney at (888) 597-9685 TODAY.