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Providing For A Disabled Family Member


When someone is planning out their estate, they very often will want to provide for a disabled family member, bequeathing them certain assets or setting aside money for their use. However, what many are unaware of is that there are asset restrictions on government programs like Medicare and Medicaid (programs that many disabled people rely on), and any significant bequest will put a disabled person over the limit. There are, however, ways to ensure that some of your assets reach your disabled loved one without potentially endangering their benefits.

Avoiding Asset Limits

The government programs that the most disabled people rely on are Social Security Supplemental Security Income (SSI), and Medicaid, both of which have asset limits of $2,000 – going over that limit at any time immediately rescinds the person’s right to receive benefits. While this does place real hardships on many disabled people – for example, it makes it very difficult for a disabled person to ever marry and retain their benefits – the rule has not changed for many years, and for now, must be accepted.

A special needs trust (SNT) is perhaps the most common way for interested friends and family members to set aside assets for their disabled loved one – if the trust is properly created, it can be valued at any amount, as the proceeds will not count toward the asset limit for SSI purposes. There are two types of special-needs trusts: a first-party SNT is for when a disabled person only became disabled after receiving property or funds, and the trust must repay government agencies like Medicare when the disabled person dies, while a third-party SNT is best when an individual wants to make a gift of property or funds to a disabled person with no obligation to repay government agencies later on.

Rules & Regulations

As with every other trust, three people must be involved in the creation of an SNT. The settlor is the person creating the trust itself, for the benefit of the beneficiary, who is the disabled person. The third person is the trustee, who administers the funds or assets that the trust contains. While an SNT must be irrevocable (that is, it cannot be changed), it may be a living trust, where the assets are available during the settlor’s lifetime, or it may be a trust where the assets are only accessible upon the settlor’s passing; this type of decision is almost entirely up to the settlor.

It is important to keep in mind that there are some restrictions on what can be paid for by a special needs trust. For example, day-to-day expenses like rent or mortgage payments must be paid out of other income, but school tuition, vehicle-related expenses like car insurance, and legal fees can come out of the trust. At least in theory, the trustee can answer any questions as to whether a certain expense can be paid for by trust proceeds, but it is crucial to ensure that the trust is drawn up properly so that government asset limits will not apply when least expected.

Call A Naples Estate Planning Attorney

If you have a disabled family member, it is understandable to want to ensure they are provided for upon your passing. However, it is crucial to make sure that you do so in a way that will not make them lose their government benefits. If you have questions, concerns or just want to set up a complimentary consultation to discuss your personal legal issues in a confidential setting, contact James R. Nici, the Managing Partner of Nici Law Firm, a Naples estate planning attorney with almost 30 years of legal experience.  This may be the first step toward ensuring all is how you want it to be going forward. Contact our offices today via our website, or on the telephone at 239-449-6150, to schedule your complimentary consultation.


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