Leaving Money to Disabled Loved Ones

Leaving Money to Disabled Loved Ones

Leaving money to loved ones in your will is a way for you to take care of them even after you’ve passed on. If you’re planning on leaving any amount of money or inheritance to an individual with a physical or cognitive disability that requires them to be on state benefits, it’s important to be aware of how your gift may directly impact their eligibility for programs such as Social Security Income (SSI) and Medicaid.

 

Eligibility Requirements for SSI

Individuals with physical or cognitive disabilities who rely on SSI or Medicaid must follow strict resource limits on income and assets.

Under these limits, individuals receiving state benefits cannot have more than $2,000 in assets at any given time.

Couples who receive SSI or Medicaid have an asset threshold of $3,000.

Individuals with disabilities are also barred from owning vehicles, boats, and homes.

If recipients of benefits exceed these resources limits they risk losing part or all of their benefits, including healthcare, housing, and food coverage. While oftentimes receiving an inheritance can cover expenses, losing these benefits can have severe negative effects on an individual’s quality of life.

 

Understanding these resources limits is crucial to creating a system that will allow you to provide for your loved one(s) without risking them losing their benefits.

SSI benefits are meant to cover essentials for living, such as rent, money for groceries, or clothing.

If an individual were to receive an inheritance after a family member or loved one passed away, this money would a) need to be spent within the month and/or b) could not be used for rent, groceries, housing bills, etc. without that person becoming at-risk for losing their benefits.

 

The Solution: Special Needs Trusts

Special Needs Trusts are designed to solve this issue. Special needs trusts are trust funds set up in a way that keeps the money you leave to a loved one from being labeled as an “asset” while still providing that money to your loved one.

Because SSI benefits are specifically meant to be used for rent, groceries, and other necessities, the money in a special needs fund cannot be used to meet these needs. If this money is used for any of these things it is referred to as in-kind support, which could reduce their benefits.

Instead, the money in a Special Needs Trust can be used to cover other things such as entertainment, personal property, services, etc.. This money may also be used to cover the cost of medical equipment and care for things that Medicaid does not cover, such as wheel chairs or other medical devices.

This is why Special Needs Trusts are often thought of as “parent’s pocket” funds, since they can often cover things that a parent could reach into their pocket and help pay for.

 

If you are considering opening a Special Needs Trust as part of your end-of-life plan, you’ll need to speak with an attorney to work out the details.


Published 03/31/2022.