Estate planning clients with special needs children sometimes want to leave everything to their non-special needs children. They are certain those other children will take care of their special needs sibling. While the children who receive the money may intend to care for their special needs sibling, life can interfere with everyone’s plans. If you leave the money outright to your other child, it is their money. This can lead to unexpected consequences:
- If your non-special needs child dies, their spouse may inherit the money with no obligation to spend it on your special needs child and no obligation to continue providing care for your special needs child.
- If your non-special needs child gets a divorce, and he or she commingled the funds in a joint account or can’t prove they inherited the funds, their soon-to-be ex-spouse may be awarded some of the cash. Or the soon to be ex-spouse may empty the joint account before the divorce.
- If the inheritance is in a bank account in the non–special needs child’s name and a judgment is obtained against that child, the bank account may be garnished to pay that judgment and the money intended for your special needs child will be gone.
- If the non-special needs child files bankruptcy, the bankruptcy trustee may be able to take the money to pay that child’s creditors – or those of his or her spouse.
The best way to ensure funds will be available to care for your special needs child is to set up a Special Needs Trust. You can name another of your children as trustee. Or you can name a corporate trustee or a pool trust if you want to take the burden off of your other kids. Or you can name one of your kids and someone else as co-trustees. The trust will spell out how money can be used for your child while maintaining their qualification for medical benefits provided by Medicaid.
Additionally, Medicaid is required by federal law to try to recover any funds it spends on caring for someone out of that person’s estate. However, any money you put into a special needs trust will be protected from Medicaid recovery when your special needs child dies and will pass to whoever you direct in the trust document.
Contact us if you wish to discuss estate planning options for protecting your special needs child or grandchild.
Megan Baumer Estate Planning and Elder Law Attorney Law Office of Michael Baumer 512-476-8707 Website: www.baumerlaw.com/estate-planning Blog: www.baumerestateplanning.com Photo by Fakeem Iqubal from <a href="https://www.vecteezy.com/free-photos">Free Stock photos by Vecteezy</a>
