By Attorney Dan Vu
Unfortunately we live in a world where even when you want to do a good thing for someone, like leave them an inheritance, you may be creating a serious problem for them. For example, if a disabled family member has been approved for government benefits, like SSI or Medicaid, and they now receive an inheritance, they will have to update the government agency about their inherited assets. The agency may count the inheritance as an asset that disqualifies them for future benefits.
More common, and worse than the previous example, is when the disabled family member forgets – or does not know that they are required – to report the inheritance and therefore government payments continue. Every year, the Agency conducts an audit and they will find out about the inherited assets. Unfortunately for the disabled family member in this case, the Agency will not only suspend future payments but will also demand that they return all payments received from the time of inheritance to date!
What if the beneficiary has already spent the money? The agency becomes a debt collector, and the beneficiary will wish they never received the inheritance.
Knowing that they could cause such problems, many people choose simply to disinherit the disabled family member. This results in leaving them out in the cold when they could benefit most from the inheritance.
There is a better way. A Supplemental Care Trust can be used for the benefit of the disabled beneficiary. The inheritance left to the Supplemental Care Trust can still be used directly for the disabled beneficiary’s supplemental needs, i.e. anything that the government benefit is not providing. By law, this trust cannot be used to disqualify the beneficiary for any public benefit and does not need to be reported to the government agency. The only requirements are that the trust be set up by someone else, typically the parent or the grandparent, and that a trustee be appointed, but that trustee could even be the disabled beneficiary’s sibling. When the disabled beneficiary needs a new car, some funds for a trip, or almost any other “supplemental” expense the trustee will simply write the check. Also, the trustee is limited to only writing checks to or for the benefit of the disabled beneficiary to ensure that trustee has no incentive to keep the funds from a disabled beneficiary’s reasonable request. In this way, the beneficiary can keep their government benefits for basic necessities while making life easier by using the supplemental care trust funds.
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