Unfortunately every one of us has someone in our extended family or knows of another family that has a member with special needs. In the context of financial planning the term special needs applies to loved ones who cannot, for some reason, take care of themselves. The reasons are varied and include, for example, children born with Down’s syndrome; young people who have developed schizophrenia or some other severe mental illness; a person permanently incapacitated from an accident; or a senior family member with dementia. Each of these people and many others need daily assistance.
The individuals who need to consult with an attorney for special needs planning are the family members, especially parents, who want to provide for their special needs loved one through an inheritance. However, leaving money in the form of an inheritance or life insurance proceeds to a person with special needs generally will not improve their life; it likely will have a detrimental effect on their financial well-being.
Financial Considerations for Special Needs Individuals
Most people with special needs qualify for Supplemental Security Income (SSI) due to their disability. SSI is a federal program that provides financial support to individuals with disabilities. Special needs individuals also generally qualify for Medicaid which covers many medical costs. However, in order to qualify for Medicaid a person must have less than $2,000 in assets.
Special Needs in Estate Planning
It is easy to see that leaving a lump sum of money as an inheritance or life insurance proceeds to a person with special needs jeopardizes medical coverage through Medicaid. A person on SSI disability typically will not be eligible for private health insurance so any inheritance will immediately pay for medical bills that were previously covered by Medicaid. When the inheritance is exhausted the loved one must requalify for Medicaid.
Providing for a person with special needs, including a spouse, requires complex planning that is best done with the advice of a qualified attorney.
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