If you have a beneficiary with special needs, it is important to consider them as you make your estate plan. One thing you may want to think about is setting up a special needs trust. This gives you the ability to set aside money for that beneficiary so that their needs can be met after you pass away.
Of course, there are alternatives. You may be considering leaving a significant inheritance to that beneficiary, perhaps by putting it in your will. Why would it be better to put it into a trust, rather than leaving it to that person directly through your will?
Replacing government benefits
The problem is that the individual who has special needs may receive certain government benefits. To get these benefits, there is a mean test. If someone has too much money, they are not going to qualify.
In other words, the beneficiary may qualify for government benefits today, but they would suddenly become ineligible if you left them $100,000. They would have to spend all of that money down and then reapply for benefits. This can make things very complicated, it can put the benefits in jeopardy and it can essentially waste the money that you’re leaving behind.
But if you put the money into a trust, then the trust owns it and your beneficiary will still pass the means test. This does not replace the government benefits. Instead, the trust is able to supplement them.
Setting up your estate plan
This can be a complicated financial situation. It’s important to understand all of the steps that you can take while focusing on your family.
