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A Better Partnership


Jun 2013
June 01, 2013

Estate Planning Tip: Is It Ok To Disinherit a Special Needs Beneficiary?

From time to time, I meet with clients who wish to disinherit a special needs beneficiary. Often, they have been advised by professional advisors or family friends who have a vague understanding that receipt of an inheritance by a disabled individual will have adverse consequences on the eligibility of that individual for government benefits such as SSI and Medicaid.  These persons may be unaware that special needs trusts are available to hold assets for disabled individuals without disturbing benefits. Or, they may believe such a trust is not worth the hassle or expense when a family member is available to hold the assets for the disabled person on an informal basis.

Informal arrangements are problematic for a number of reasons.  First, they are unenforceable.  The person holding the funds could decide to use them for his or her own benefit and the intended beneficiary would have no legal recourse.  Even a well-intentioned family member could lose the funds in a divorce, by filing for bankruptcy, by failing to pay tax liabilities and becoming subject to a tax lien.  The well-intentioned family member could also die before the disabled person with a Will that makes no provision for the disabled person, or more likely, with no Will so that the funds become the property of other persons under state law.

A special needs trust avoids all of these pitfalls.  The funds held by the trust can open up a world of opportunity for the disabled beneficiary that he or she would not otherwise have.  While preserving eligibility for existing government benefits, the trust funds can provide medical benefits not covered by Medicaid or Medicare, educational opportunities, social opportunities and material benefits that would be foreclosed if the beneficiary were limited to the assets and income limits of the principal governmental programs that assist disabled persons.  Obviously, it is up to each individual whether or not to leave assets to a special needs child.  Perhaps a full share of the estate is not warranted.  However, support beyond that provided by governmental programs will make life better for the beneficiary and a special needs trust is the best vehicle for providing that support.  


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