If you have a disabled adult child, you may use your income or savings to improve his or her quality of life. Using your estate plan to give money directly to your son or daughter after your death, though, may imperil his or her eligibility for needs-based government programs.
To qualify for Medicaid, Supplemental Security Income and other government programs, individuals must have limited financial resources. Consequently, if you leave a lump sum of cash to your disabled child, he or she may simply have too much wealth to be eligible for needs-based financial assistance.
The special needs trust
There may be a workaround that gives you peace of mind while continuing to improve your child’s quality of life. If you form a special needs trust, the trust holds your contribution for the benefit of your son or daughter. While there are exceptions, disbursements from this type of trust typically do not count as income for purposes of qualifying for government assistance.
The special needs trustee
Another advantage of setting up a special needs trust is naming a trustee to oversee it. While this person ensures the trust complies with tax regulations and reporting requirements, he or she also communicates with your disabled child’s care providers. If your son or daughter has unmet needs, the trustee may find a professional to meet them.
Additionally, the trustee approves disbursements, helping to safeguard your son’s or daughter’s ongoing eligibility for government funds. If you opt to create a special needs trust, knowing the trustee will protect your disabled child’s interests may put your mind at ease.