A friend or relative makes a bequest to a disabled person in their will, hoping to make his life easier, but without proper legal advice that gift may have to be rejected by the recipient to avoid financial loss. A simple modification of the donor’s will could prevent this unwanted result.
Anyone with a will or considering gifting to a disabled person should be sure his will has a “special needs trust provision.” This provision allows your executor to convert your gift to a disabled person to a gift to the recipient’s special needs trust to provide for the needs of the recipient without his or her loss of governmental and other entitlement programs and benefits, such as subsidized housing, SSI and Medicare, that may be dependent on a “means test.” An unrestricted inheritance or gift could disqualify the recipient because it could cause him or her to have too much income or assets to qualify for or continue to receive entitlements or benefits. A gift made to the recipient’s special needs trust will not increase his or her net worth, but can provide for the recipient’s unfunded needs, such as vacation, entertainment, therapy and special accommodations. Without a special needs provision, your recipient may be forced to choose between rejecting your gift or losing the benefits to which he is entitled.
This provision is important for all wills and is another important reason to have a will, even if you anticipate only a modest estate. It not only protects disabled beneficiaries, but all beneficiaries, since anyone could become disabled before your gift is realized.
If a potential beneficiary is already disabled or receiving entitlements or benefits, he or she should consider establishing a special needs trust so others can donate or gift to the trust for his or her benefit without jeopardizing his or her entitlements or benefits.
At Brooks, Tarulis & Tibble, LLC we assist individuals in estate planning, asset transfers, living trusts, special needs trusts and other methods of holding and transferring title to property in order to maximize what can be passed on to your heirs, while minimizing death taxes, costs and delays. If we can assist you in this regard, please contact me.