Answer: Yes, leaving your grandson money may disqualify from his SSI and Medicaid benefits as he can only have a maximum of $2,000. I see this quite often. It can really create a problem because he will lose his Medicaid which is his health insurance. With the cost of health care these days, one trip to the doctor could cost him all of his inheritance and leave him owing money to the doctor. Also, once his inheritance is down below $2,000 he will have to reapply and requalify for SSI and Medicaid. That can sometimes take a long time.
You can avoid all of these pitfalls by creating a Special Needs Trust. A Special Needs Trust can be part of your regular estate planning trust. However, the distribution for your grandson will go into the Special Needs Trust instead of going to him outright like the other beneficiaries. The Special Needs Trust holds the money for his benefit. You will appoint a trustee for the Special Needs Trust who will use the funds to improve your grandson’s quality of life. However, your grandson will not have any rights to the funds; it is purely at the discretion of the trustee to make any distributions. The Special Needs Trust can be used to pay for uninsured medical or dental treatments. It can pay for private rehabilitation, schooling, and recreation. It can cover ball games, camping trips, roller blades, pizza parties, vitamins, or even a travel companion. The money can assist him in reaching his maximum potential and quality of life and then eventually pay for his funeral. These are all "extras" he cannot afford on poverty level SSI income and Medicaid alone.
The hallmark of this trust is that the trustee has full discretion to spend the money pretty much however he or she sees fit; as long as it is for your grandson’s benefit. The only thing the trustee cannot spend the money on is food, clothing, or shelter. Since your grandson has no legal right to withdraw any of the money, a governmental agency (SSI or Medicaid) will not be able to count the Special Needs Trust as part of your grandson’s assets. This way your money will be used to help your grandson enjoy his life and still keep receiving his public benefits. I am sure he will greatly appreciate the gift from his grandparents.
I would contact an estate planning attorney who handles Special Needs Trusts. If you don’t have your own trust yet, now is the time to set it up and make the Special Needs Trust part of your trust. That way, your estate will be easier for all of your beneficiaries.
Michael B. Walling is an Elder Law attorney with an advance Master of Laws degree. He manages The Elder Law Center and the law firm of Michael B. Walling, PLC. Mr. Walling is also a part-time Professor at Western Michigan University. Please email any questions you would like addressed to: info@wallingplc.com. This column is intended for general information purposes only and should not be considered as legal advice to any particular person.
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