Do estate plans interfere with government benefits?
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Do estate plans interfere with government benefits?

On Behalf of | Aug 6, 2021 | Estate Planning

If you have children who have disabilities, you may worry about their abilities to find work and support themselves as adults. Using your estate plan to provide for the future well-being of your kids is a noble goal. Still, if you gift money directly to your children, you may jeopardize their eligibility for government benefits.

Before awarding Medicaid, Supplemental Security Income and many other public benefits, government agencies often thoroughly examine income and assets. If your children have too much wealth, they may not qualify for vital funds.

An effective workaround

To preserve your children’s eligibility for means-tested government benefits, you probably do not have to leave them out of your estate plan altogether. With a special needs trust, you do not transfer money or other assets to your kids. You simply set aside funds for their benefit.

Because the funds in the special needs trust typically do not count as income for purposes of qualifying for means-tested government assistance, your children may remain eligible.

Supplemental expenses

It is important to note your children may not spend disbursements from the special needs trust on anything they want. If funds go to the same expenses that government benefits cover, such as housing or utilities, your kids may inadvertently violate program rules. Consequently, the special needs trustee must carefully review proposed disbursements before approving them.

Estate planning can be increasingly complex for those who have children with disabilities or other special concerns. Ultimately, though, if you set up a special needs trust, your kids may have a better quality of life after your death.

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