By Andrew M. Lamkin, Esq.
Clients came to my office for advice on how to make arrangements for their 5-year-old son. Their son is autistic and their situation is common to parents who have children with disabilities. Two major problems exist. First, when a disabled child turns 18, the parent loses the ability to make medical and financial decisions for the disabled child. Second, parents, such as my clients, are never sure of the proper way to leave assets to their disabled child and plan for their disabled child’s care when they pass away. Do they leave money to a family member to take care of the disabled child? Do they leave money to the disabled child directly? What happens to government benefits such as Medicaid and SSI? This article will address the second issue.
Autistic children, like most children with any developmental or emotional disability, are entitled to receive government benefits such as Medicaid or SSI. To be eligible for these benefits, the recipient must have less than $13,050 in assets ($2,000 for SSI). Therefore, if a disabled child inherits or received money from a lawsuit, the child will lose his benefits because he will be over the asset threshold.
One option for a parent is to leave money to another person, with instructions to support the disabled child. A common example would be to leave money to another child, with instructions to support their disabled sibling. However, there are problems with this strategy. First, while the disabled child would still receive Medicaid and SSI, there is no legal obligation for the sibling to support the disabled child. The money becomes the property of the sibling and he can do with it what he chooses. Second, the sibling may go through a divorce or be sued for something unrelated to the disabled sibling, such as a car accident where the siblings assets become part of a personal injury suit. Unfortunately, even the assets the sibling is holding for his disabled sibling would be vulnerable to a personal injury lawsuit. If either occurs, the money left for the benefit of the disabled child could be lost.
While the first option of leaving money outright to the disabled child will result in a loss of benefits, the second option carries with it the risk that the assets are not truly protected for the disabled child. The goal is to find a way to protect your child’s benefits, while at the same time, leaving money for his support.
Fortunately, a parent can create a Supplemental Needs Trust (SNT), to solve both issues. An SNT enables a person with a disability to maintain eligibility for government benefits. A parent can establish an SNT during the life of the disabled child (Third Party Intervivos SNT) or pursuant to a Last Will and Testament, which is not funded until the death of the parent (Testamentary SNT).
The logistics are as follows. A parent can leave assets to the SNT, whether through the Will or as a beneficiary of a bank account or insurance policy. A Trustee, presumably the person caring for the disabled child when the parent passes away, is appointed by the parent to manage the money for the disabled child. The Trustee is authorized to use the funds in the Trust for the benefit of the disabled child. The funds can be used by the Trustee to pay rent, credit cards, or other expenditures, such as medical costs (which may not be covered by Medicaid) for the disabled child.
The benefit of creating an SNT is simple. It is the only way to ensure both, that funds will be available to provide for the disabled child and that he will continue to receive SSI and/or Medicaid. Supplemental Needs Trusts should be a consideration for every parent, grandparent and sibling of an individual who receives SSI and/or Medicaid. Everyone has varying circumstances and therefore the proper way to set up an SNT should only be determined after consultation with an attorney experienced with the rules regarding Supplemental Needs Trusts.