Protect benefits for children with special needs

Long version

If you have a child or other family member who has special needs due to physical or mental conditions, you face a variety of challenges planning for their care, including financial ones. You may also have some well-meaning relatives who want to help, but who may not realize that their moves could actually result in some serious lifestyle and monetary problems for your loved one. Fortunately, by planning ahead, you can avoid these potential traps.

As you probably already know, individuals with special needs are eligible for a variety of government benefits and local programs that provide assistance with housing, medical needs, specialized equipment, independent living, job training and other services. You may also know that some of these programs require participants to meet financial criteria to qualify for benefits. Usually, this isn’t a problem if your loved one has little income and few assets.

Difficulties can arise, though, when other relatives, such as grandparents, include loved ones with special needs in their estate plans by naming them as beneficiaries of insurance policies or retirement assets, or as beneficiaries of any trusts the grandparents have established. In these situations, loved ones who receive or inherit a sizable amount of assets may then be ruled ineligible for some important services.

Hopefully, your relatives will have informed you of their plans. If so, let them know that although you appreciate their generosity, the way they’ve chosen to show it could have unanticipated – and harmful – effects.  You could then suggest ways they could structure their gifts to be more valuable.

Specifically, they can help through a special needs trust, either one that's already been created or one they create for their gift. A special needs trust is designed to help people with special needs use financial gifts or inheritances for a variety of purposes while keeping their eligibility for some government programs and other services. There are two main types of special needs trust:

  • First-party special needs trust
    An individual with special needs, their legal guardian or the court can establish a first-party special needs trust benefiting that individual. The first-party special needs trust is funded by the individual’s own assets, either through earnings or an inheritance or a personal injury award. A first-party trust contains a “payback” rule, which means that when the individual beneficiary with special needs dies, the trust must pay back the state for certain benefits received.

  • Third-party special needs trust
    A relative or person other than the individual with special needs who wants to include that individual in their estate plan can set up a third-party special needs trust. The third party trust is funded with assets from someone other than the individual with special needs. With a third-party trust, no “payback” provision is required.

Many issues are involved in establishing an appropriate special needs trust. Consequently, you’ll need to consult with your legal advisor to determine your next steps. Afterwards, you’ll want to involve everyone in your family who could contribute to a trust, so they’ll all know what to expect and how they can participate. Once the arrangements are made, you can all feel like you’ve done your part to make things easier for the loved one in your life with special needs.

This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.
Edward Jones. Member SIPC.

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Short /radio version

PSA: Protect Benefits for Children with Special Needs

TBA: Jan. 18, 2021
Words: 184  (excluding FA’s name, address/phone number)

If you have a child or other loved one with special needs due to physical or mental conditions, you face some challenges, including financial ones. You might also have some well-meaning relatives who want to help – but are they doing it the right way?

For example, grandparents who leave substantial assets to a grandchild with special needs could jeopardize a grandchild's eligibility for important benefits related to housing, medical care, independent living and other services.

So, if you learn that the grandparents or other relatives are planning to leave this type of inheritance, you may want to suggest an alternative form of generosity. Specifically, you may want to encourage them to look into contributing to what’s known as a special needs trust.

This type of trust can supply financial resources to individuals with special needs without endangering benefits such as Medicaid and Supplemental Security Income, or SSI.

See your legal advisor to determine if a special needs trust is right for your family’s needs. It might prove to be a good way to make life easier for the loved one with special needs in your family.

This is (FA’s NAME), your Edward Jones financial advisor at (Branch address or phone #).

Member SIPC

Number of words: 184