The Do’s and Don’ts of Planning for Your Grandchild with Special
As reprinted from the Exceptional Parent Magazine’s
the best for their children and grandchildren. They often give gifts while
alive, or make provisions for after their death. Grandparents who are
in a position to leave money to grandchildren often want to do something
for their grandchild with special needs. They often worry about a grandchild
with a disability, who may need additional assets or assistance to enjoy
a good quality of life. Grandparents are sometimes told not to leave their
grandchild with special needs anything because the child may lose government
benefits. People are often confused as to what to do or not do.
Grandparents can leave money to their grandchild(ren) with special needs.
But there are very precise ways to do it. Money has to be left in such
a way so that government benefits are not lost. Assets in excess of $2,000
will cause the loss of certain government benefits for the person with
special needs. If properly structured by a knowledgeable special needs
attorney, the special needs trust assets will not count towards the $2,000
SSI limits for an individual. Money should not be left to the grandchild
directly, but should be left to a special needs trust. The special needs
trust was developed to manage resources while maintaining the individual’s
eligibility for government benefits. The trust is maintained by a trustee
on behalf of the person with special needs. The trustee has absolute discretion
to manage the money in the trust and decides how the money is used. The
money must be used for supplemental purposes only. It should only supplement,
or add to benefits (food, shelter or clothing) that the government already
provides through Supplementary Security Income (SSI). It must not supplant
or replace government benefits. If properly structured by a knowledgeable
special needs attorney, the special needs trust assets will not count
towards the $2,000 SSI limits for an individual.
Summary of Do’s and Don’ts!
1) Make provisions
for your grandchild(ren) with special needs. Leave money to the child’s
special needs trust. The special needs trust is the only way to leave
money without losing government benefits.
2) Coordinate all planning with the child’s parents or other relatives.
Notify the parents when you plan for grandchild(ren). Plan with others.
3) Leave life insurance, survivorship whole life policies and annuities
to the child’s special needs trust. The special needs trust can
be named as the policy beneficiary. When the insured or annuitant dies,
the death benefit is paid to the special needs trust. The special needs
trust then has a lump sum of money to be used in caring for the grandchild(ren)
with special needs.
4) Consult with trained financial and legal professionals with specialties
in special needs estate planning.
1) Do not disinherit
your grandchild(ren) with special needs. Money can now be left to a properly
drawn special needs trust. It does not make sense to disinherit any of
your grandchild(ren) with special needs.
2) Don’t give money to your grandchild(ren) with special needs under
UGMA or UTMA (Uniform Gift or Transfer To Minors Act). Money automatically
belongs to the child(ren) upon reaching legal age. Government benefits
can be lost!
3) Don’t leave money to a grandchild(ren) with special needs through
a will. Money left will be a countable asset of the child and may cause
the loss of government benefits.
4) Don’t leave money to a poorly set- up trust. Money left in an
improperly drafted trust can result in the loss of government benefits.
5) Do not leave money to relatives to keep or hold for the child with
special needs. The money can be attached to a lawsuit, divorce, liability
claim or other judgment against the relative.