Have you ever sat down with a member of your family and helped him or her apply for government-funded assistance programs? If so, you have probably seen firsthand that many of these programs have eligibility criteria that often include limits on income and owned assets. These requirements, in most cases, were established in order to ensure that those with the greatest need were served by these programs. However, the limits have also created unintended consequences for many people.
Such is often the case when an individual who receives benefits through Social Security, Medicaid, or other income-based programs is named as an heir in someone else’s will. It turns out that even a one-time transfer of property—which is generally what happens in inheritance situations—could have an effect on the heir’s eligibility to continue receiving benefits on which he or she may rely.
Understanding Government Aid Programs
Government assistance programs are virtually everywhere in today’s world, but many of them have been around for decades. Some even trace back to the “New Deal” measures of the 1930s, which were originally designed to help Americans who were most devastated by the Great Depression. As anyone who pays attention to politics can attest, government benefit programs are topics of constant debate and controversy, as legislators rarely agree on the future or the funding of such programs. Very few people, however, deny that these benefit sources are useful for those who are truly in need of medical care and financial help.
When a government aid program has an income and asset limit, even a modest inheritance could make a participant’s financial situation seem to be much better than it truly is. To address this reality, the federal government passed a law in 1993 that created an instrument known as a special needs trust, also called a supplemental needs trust. A special needs trust is a financial instrument that gives a person receiving government assistance the ability to accept an inheritance without disqualifying him or her from the assistance program(s). Instead of the heir receiving the inheritance in cash, the inheritance can be placed under the ownership of a trust for the heir’s benefit.
Looking Toward the Future
As you consider all of the circumstances that you want to address in your estate plan, you might already know that one or more of your chosen heirs rely on government assistance programs due to disabilities or other reasons. But, what happens if you name an heir who is not disabled or on any aid programs and he or she becomes disabled between your will being executed and death? The answer is not necessarily pleasant. If your estate plan does not account for this type of development, your heir’s eligibility for government aid might be negatively affected.
The good news is that accounting for new disabilities and similar developments is quite easy. With just a few simple words in your will, you can instruct the executor of your estate to determine whether or not any of your chosen heirs have incurred disabilities after the execution of your will. If the executor determines that a beneficiary is now disabled, a supplemental needs trust can be created so that his or her inheritance can be directed into it.
A DuPage County Trusts Attorney Can Help
At A. Traub & Associates, our skilled Lombard estate planning lawyers have many years of experience in the creation and management of special needs trusts. We can also help you draft a will that accounts for the possibility of needing such a trust in the future. Call 630-426-0196 to schedule a confidential consultation with a member of our team today.