This month Morton Elder Law is focusing on the most frequently asked questions related to Special Needs Planning and Inheritance. Check in every week for updates that will benefit you and your loved ones.

Question:

I have a child receiving public benefits through disability, should I give their inheritance to a sibling?

The short answer is NO, you shouldn’t give inheritance to a sibling of a special needs child.  Leaving your special needs child an inheritance (be it in their name, or their sibling’s name) can do more harm than good.

4 Key Reasons Not to Gift Inheritance to a Sibling

1. According to Federal Law, a special needs child with money and assets beyond $2,000 in his or her name will become ineligible for public benefits. An inheritance would make receiving means-tested government benefits difficult, if not impossible.
2. There is no guarantee the money will be used for the special needs child. Depending on the child’s disability, money given directly to a child with a disability may be susceptible to mismanagement or being squandered by a disabled child, or perhaps even stolen by an unscrupulous person who may take advantage of someone with a disability.
3. Money could easily get lost if not protected. For example, even with a well-intentioned sibling, an unexpected life event, such as divorce, creditor claim, or even a prior death could and would unfairly impact the inheritance. There is no guarantee that money left in the name of a sibling will ever reach the disabled child. Even if the sibling had the best intentions, things can happen outside of their control that may result in those funds being used for something other than the benefit of the disabled child.
4. Public benefits are seldom sufficient to meet all the needs of a special needs beneficiary. Frequently the child’s parents supplement the needs of the disabled child. But giving those resources directly to the child will cause more of those benefits to end, resulting in the child’s inherited funds being exhausted prematurely, with no means of supplementing government benefits later.

What is the Best Way to Gift an Inheritance?

With the best interest of your family in mind, Morton Elder Law recommends setting up a Special Needs Trust (also referred to as a Supplemental Needs Trust).

A Special Needs Trust is a trust that guarantees an inheritance and/or assets are available to your special needs child, while also continuing to qualify them for public benefits. There are two types of Special Needs Trusts: First-Party Trust and Third-Party Trust.

Watch for next week’s blog on more specifics surrounding both First-Party and Third-Party Special Needs Trusts, as well as questions regarding Medicare.

Curious to know more about Special Needs Planning? Check out more information on our website.

Your questions, as well as the well-being of your special needs child, is our speciality.

~ Ronald Morton