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How to Leave Money to Disabled Beneficiaries Without Compromising Benefit Entitlements

How to Leave Money to Disabled Beneficiaries Without Compromising Benefit Entitlements by Tom Sciacca{Read in 4 minutes} While not everyone who suffers from a disability is on government entitlements, many times I am faced with questions from people who have adult children or siblings who fall into this category. What is their concern? Their concern is that they want to make some provision for their loved one without losing the needs-based government entitlements that they need to meet their basic daily needs.

For example, maybe someone has an adult son who is in his 50s, and he is suffering from an intellectual disability. He resides in a group home, attends a day program, and works part-time. However, he needs Medicaid and Supplemental Security Income (SSI) in order to remain enrolled in the benefits which pay for the group home and the day program. If the client were to leave the money to this beneficiary outright, he would immediately have too much money to continue receiving benefits and would need to pay privately. With the cost of care skyrocketing everyday, this could mean that he would run through the funds very quickly only to have to reapply for benefits when the sum runs out. At the end of the day, he will receive very little or nothing from the client, and the client’s intent to benefit the son never comes to fruition.

An attractive alternative is something called a Supplemental Needs Trust. This is a special type of trust that is expressly allowed by both federal and New York State laws concerning needs-based government entitlements, such as Medicaid, SSI, food stamps, Section 8 housing, etc. A client can leave money to a beneficiary enrolled in the benefit programs by leaving the money directly to the Supplemental Needs Trust. The way this Trust works is that it supplements, but does not supplant, the services provided by the government entitlements.

For example, if the beneficiary is receiving Medicaid, the Trustee should not be paying for medical needs, because Medicaid is covering those costs. However, the Trustee can help the beneficiary buy some clothing, or take a trip to the family reunion, or buy some new music, or an unlimited Metrocard to ride the subway. So long as the beneficiary doesn’t duplicate the programs and so long as the beneficiary does not have access to cash, there is no limit on the amount of money that can sit in this Trust for the person’s benefit, and it will never disqualify the beneficiary from benefits, as long as the Trustee and the beneficiary “play by the rules.” The Trust will provide that, during the lifetime of the beneficiary, he or she is the sole person entitled to benefit from the Trust. Upon the eventual death of the beneficiary, any funds remaining in the Trust can go to the alternate beneficiaries of the client’s wishes – these may include other children, siblings, family members, or charitable organizations. The client gets the benefit of knowing that her primary beneficiary will have funds available to improve the quality of their life for the remainder of their lifetime and is secure in the knowledge that upon the death of the beneficiary, other beneficiaries can receive any unspent funds.

Therefore, in conclusion, planning ahead for families who want to make provisions for disabled beneficiaries can be crucial. But if done correctly, the client can ensure that they are enhancing the beneficiaries quality of life without disqualifying them from necessary government entitlements.