How To Protect Special Needs Inheritors From Losing Government Benefits

If you plan to provide an inheritance for someone with special needs or to someone receiving income or asset-based government benefits, it is very important to create a special and specific plan for transferring your assets upon death in order not to cause any problems for those beneficiaries.

Special needs children are normally some form of government benefits. If that child inherits the property or significant assets, they are likely to lose their government benefits.

Those government benefits could assist that beneficiary to obtain expensive drugs, see specialized physicians and obtain entry into certain facilities.  

Whether the benefit is from Medi-Cal, Medicaid or SSI (Supplemental Security Income), these can be lost upon receiving an inheritance. 

The government basically says you have money, go pay for it by yourself. The special needs beneficiary could also have problems with managing the amount of money and/or forget to buy the proper insurance for his care. 

As can be expected, many people would want to keep those government benefits for that special needs child because they take care of medicine and lifetime necessities. 

The worst call is when someone calls me on government benefits and asks me if I could cash a $350,000 check left to him by his mother. 

How can you prevent this catastrophic loss of government benefits? 

Would you like to protect a special needs child from losing their government benefits? Discover how you can prepare your trust the right way by signing up for a strategy session today.

The answer to the above question is to create a very peculiar sub-trust within your living trust called a Special Needs Trust (“SNT”)

This trust effectively supplements the care that is provided by the government. 

This is exactly what you wanted to happen. The government pays for necessities and if anything is further needed, your SNT steps in to save the day! 

When the special needs child’s trust is set up with the right trustee and the right provisions, your child will not lose government benefits. 


So, what are some of the issues that could arise with a special needs trust?

To explain this, I am going to refer to a case that I’ve seen before. This type of problem occurs all too often because the entire estate was not planned properly. 

Single Mother had a Trust and a Special Needs child. She had a $2 million estate. Half of the money was in the Trust and half of it was an IRA, a retirement asset. As can be expected, the trust had special needs terms upon death. Therefore, the $1 million was distributed to the inheritor exactly as intended – through this wonderful Special Needs Trust!

However, the IRA is a special asset – it does not follow the trust document by nature. The IRA goes to the beneficiary directly. Who was the beneficiary? The child, of course!

Guess what happened? He lost all of his government benefits! The government said the IRA was available for him to use as he pleases and he, therefore, did not need government assistance.  

This is why you need to look at your estate as a whole. Maybe a piece of jewelry unaccounted for will produce an unintended result for your child!

So, what do you need to do here?

You could set up an IRA Inheritance Trust with special needs trust provisions. Solved! 

Would you like to protect your special needs child from losing their government benefits? Discover how you can prepare your trust the right way by signing up for a strategy session today.