How to Maximize an Inheritance for Someone on Government Benefits

How to Maximize an Inheritance for Someone on Government Benefits

Families with a disabled minor child are usually vigilant about setting up a plan that will care for and protect the special needs of their child. These families understand the value of setting up a special needs trust that will receive the child’s inheritance upon the parents passing. But special planning is also appropriate for adults that are disabled or have special needs. Specifically, for people who are receiving certain types of government benefits or who may need benefits in the future.

The 2009 U.S. Census Bureau reports that there are 19.5 million disabled people between ages 16 and 64 in the United States. If a disabled individual is receiving a government benefit with an asset limitation, the receipt of an inheritance would cause them to be ineligible for the benefit. For example, a person receiving Medicaid benefits or SSI (Supplemental Security Income) is eligible for the benefit when their countable assets do not exceed $2,000. The receipt of a check in their name from the estate of a family member who recently passed would likely cause their countable assets to exceed $2,000.

The inclusion of a third-party special needs trust in your estate plan can avoid this problem. This could either be a separate trust independent of your own standard trust or just special language included in your standard trust. It would provide that any inheritance the disabled person would receive from you would be held back for that person’s benefit in a special needs trust. The funds would be available to provide for the needs of the disabled individual but would not be countable toward the asset limitation of their government benefit. Remember to consider the persons in your life that are either on government benefits with an asset limitation or may need such benefits in the future. Planning now can serve to enhance the quality of life of a disabled individual when you are gone.


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