I’ve helped a lot of my clients with planning as an Atlanta estate and trust attorney, including planning for the needs of disabled children, both minors and adults. Most recently, I helped an 85 year old mother prepare a Last Will and Testament that provided for her son who was disabled by a stroke and expects to qualify for Social Security disability benefits soon. While my client would like to be able to leave her son in the best care possible, providing such care requires a lot of money that she does not have, and her son, who is only in his 50s, could live many more years and will require support during that entire period at great cost. The reality is that her son likely will qualify for and receive Medicaid support in the near future in addition to his SSDI.
While those government benefits do not add up to a lot of monthly income, they help. Further, Medicaid will cover the entire cost of the son’s stay in a nursing home if that becomes necessary. Therefore, preserving those benefits for him will be important. The problem is that, if my client leaves an inheritance directly to her son, he will lose those benefits because his wealth will exceed the qualifying asset limits for those benefits. His inheritance will then be eaten up quickly by his medical expenses. She doesn’t want to leave his inheritance to her other children with a request that they use that money for her disabled son for two reasons: (1) her other children will not legally be obligated to do so and could use the money for themselves despite her request; and (2) if they do use the money for their brother, they may give him more than the annual gift tax exclusion for him, have to file a gift tax return with the IRS, and eat into their lifetime gift and estate tax credit that they may want to preserve for their immediate family.
What should my client do? She should leave her disabled son’s inheritance in a Special Needs Trust that supplements the government benefits he receives from the SSA and Medicaid. This article provides a good synopsis of the benefits of a Special Needs Trust and how planning with such a trust will allow my client to provide for her disabled son without sacrificing his inheritance. By conditioning her son’s inheritance to only supplement his public benefits, she will stretch out the life of his inheritance to ensure he has enough funds to support his basic needs for the remainder of his life.
One point the article does not cover is that, upon the death of a person who received Medicaid benefits, Medicaid has a claim against the person’s estate. Generally, the claim is equal to the amount of benefits the person received during life. For example, if my client leaves an inheritance directly to her son, and he dies the day after he receives it, his inheritance will be subject to Medicaid’s claim even though he didn’t the inheritance until the day before he died. Had he been receiving Medicaid benefits for many years, the claim could be several thousands of dollars. Had my client known her son was going to die so soon, she likely would have preferred to leave his inheritance directly to his children or, if he had none, to his siblings. However, if she left his inheritance in a Special Needs Trust, none of the funds left in the trust would be subject to the Medicaid claim. Rather, upon the disabled son’s death, the funds would be distributed as directed in the trust (e.g., to his children or to my client’s other children).
The Special Needs Trust is a very useful tool that can provide additional care to a person already relying on public benefits without sacrificing those benefits. Further, it can be used to protect a family’s wealth from the costly medical expenses typically covered by Medicaid. If you have a family member with a disability or other condition that qualifies for public assistance that you’d like to include in your estate plan, please email me or call me at my Atlanta estate planning law firm at 404-467-8613.
