One of the major reasons to create and fund a special needs trust for your disabled child is so that your child can still receive means-tested government benefits, including Supplemental Security Income (SSI), Medicaid, and Medi-Cal. Because money kept in a special needs trust is not considered available to your child, it is not used to calculate your child’s eligibility for these government benefits, which help your special needs loved one to live comfortable and receive adequate medical care.
However, it is vital to understand that any money that your child receives, before or after your death, could prevent your child from receiving the government benefits listed above. While you might understand this, your friends and relatives may not. Years after you set up your special needs trust, a gift from your children’s grandparents or another loved one could undo your careful plan to financially support your child throughout his life.
The following assets could endanger your special needs child’s government benefits if they are paid directly to the child:
- A monetary gift.
- A gift of property.
- An inheritance.
- An IRA, 401K or other retirement benefits.
- Life insurance.
- Joint accounts.
- Divorce settlement.
- Child support payments.
- Lawsuit settlement.
What can you do to make sure that your child’s government benefits are safe, even after you are gone? First and foremost, you can take action by letting all of your relatives, friends, and loved ones know that while financial gifts to your child are extremely generous and welcomed, they cannot be gifted directly to your child.
If your child has already received a financial gift, you will need to convert the assets into exempt or non-countable assets by transferring them to a first-party self-settled government-approved special needs trust. If you are not present to make certain this transfer happened, it is imperative that your child has a caregiver or trustee that understand what needs to happen and why.
Protecting the health and happiness of your special needs child after you are gone is of the utmost importance. Make sure that you have the correct trust in place – and a contingency plan in case the unexpected happens. To learn more about preparing your estate and planning for the future with a special needs child, contact The Law Office of Janet Brewer today: (650) 325-8276.