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Common Mistakes When Planning for a Disabled Family Member

Over 85 million people in the United States live with a disability and make up the country’s largest minority. Federal and state benefits provide financial and medical support to persons with disabilities, however, most of these benefits are “needs based”, meaning a person must have limited income and assets to qualify.

Needs Based Benefits

Eligibility for benefits like Supplemental Security Income (SSI) or Medicaid require that a disabled individual have no more than $2,000 in assets and limited monthly income. A benefits recipient may still experience financial hardship due to these strict financial requirements. Fortunately, parents and family members can provide additional support to loved ones with  proper planning.  However, without the aid of an attorney with knowledge of these benefits, family members may make costly mistakes in their planning and even disrupt the benefits of their loved ones.

Property Distributed Outright

A common planning mistake is to leave property to a family member outright by a Last Will and Testament if the recipient also receives  SSI or Medicaid benefits. An applicant or recipient of benefits must then report assets over $2,000.00 that remain at the end of the month which will likely cause ineligibility. Similarly, a person not preparing a Will may unintentionally cause benefit ineligibility because state law will decide who inherits outright, even if the inheritance will negatively impact a person’s benefits.

Disinheriting a Loved One

Another common planning mistake is to disinherit a loved one with special needs. Instead of leaving inheritance to a benefits recipient, a parent will leave resources to a sibling to provide indirect support. Unfortunately, this strategy may be disastrous if the sibling loses the inheritance from a personal financial crisis, involvement in a divorce, or from being subject to a lawsuit.

Online Crowdfunding

Using online crowdfunding sites to benefit your loved one with special needs may also be hazardous if the beneficiary is applying for or maintaining benefits. In the absence of legal planning, these donations can disqualify a person from SSI, Medicaid, food stamps and Section 8 housing.

Solution: Supplemental Needs Trust

To avoid these common planning errors, one of the best strategies is to establish a Supplemental Needs Trust (SNT), also known as a Special Needs Trust.  The specific purpose of these trusts is to supplement federal and state assistance programs and not replace their benefit. More simply put, your assets in a SNT will be used only when the SSI and Medicaid Benefits don’t cover your loved ones needs. A properly drafted SNT will protect the assets within it so that SSI and Medicaid agencies will not include the property when they calculate a person’s total assets t. Also, the assets in the trust will not be subject to creditors or other issues the can arise  when  another family member is holding the assets for indirect support.

Before creating a special needs trust, it is important to seek out an attorney that understands the strict and complex eligibility requirements of government benefits programs and the different trust options that are available.

The content of this blog is for informational and educational purposes only and is not guaranteed to be correct, complete, current or representative of your geographic area. The above is not intended to be a solicitation for service  or legal advice and Rouse and Rouse, PLLC makes no warranty, expressed or implied, about the accuracy or reliability of the information in this blog, this website or in any linked website. A viewer of this content should not act or refrain from acting without seeking appropriate legal advice on the particular facts and circumstances at issue from an attorney licensed in the viewer’s state.

Since joining the practice as a partner in 2016, Jonathan Rouse has expanded the scope of Rouse & Rouse to offer Elder Law services including Medicaid, Special Needs and Veteran’s Benefits planning. The inclusion of these services has allowed him to draw not only on his legal experience and education, but also on his previous experiences as a social worker. As part of his dedication to working with seniors and their families, he works directly with his clients to learn not only about their concerns that bring them to his office, but also their personal and family experiences. This holistic understanding of clients and their families is key to providing complete and integrated legal services that address both the immediate and future needs of his clients.

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