Ensuring a Secure Future: Inheritance and Special Needs Planning

One of the most frustrating things as a Special Needs planning attorney is to have someone in my office doing planning and they tell me that they need to disinherit a family member because they are receiving some kind of government benefits.  Their mindset is that they are looking out for that loved one, but in reality, they may be unnecessarily disinheriting them.

Pat was in my office a few years ago.  After doing planning to get Pat’s husband on Medicaid in a nursing home, it was time to plan for Pat.  Pat has a daughter, Sarah and a son, John.  John is disabled and still living with Pat.  Pat explained all the wonderful things that John does to maintain some independence despite that fact that he has extreme needs and is currently on Social Security Disability and Medicaid.  Pat’s daughter Sarah is married and has children.

While creating a trust for Pat’s assets, she informed me that she did not want to leave anything to John because she did not want to create problems for his Medicaid coverage.  She explained that she already spoke with Sarah about it and she is going to leave everything to Sarah who promised she would take care of John.  I explained to Pat that I have the following concerns:

1. What if Sarah has to file bankruptcy?
2. What if Sarah gets divorced?
3. What if Sarah dies before John?
4. What if Sarah gets sued?

I explained that in all of these scenarios, Pat is leaving John with no guarantee that he will be cared for.  Pat believes that Sarah’s husband will just step in and take over, but what happens if he remarries and the new wife doesn’t want that?

Pat is better off making sure that her documents establish a supplemental needs trust for John’s share of the inheritance.  This will guarantee that John’s share is always there for his needs without affecting his important government benefits like Medicaid.  Pat can have Sarah act as the Trustee of that trust and then name alternates, and by making this change, Pat is protecting John from life events that may happen to Sarah and that gave Pat peace of mind.