If you have a family member with special needs, you may certainly want to include them when you make your estate plan. You may know that they have a limited income, for example, or none at all. Leaving them an inheritance can be life-changing. The money may mean more to them than to another beneficiary, who has their own source of income and a lower level of need.
In this situation, it is important to plan ahead carefully. Though the money can really help your chosen beneficiary, there can be some complications, depending on how you leave them the inheritance.
Maintaining access to benefits
One key detail to consider is whether the person with special needs receives government benefits. They may have applied for certain benefits to help them with necessities like medical care or housing. They rely on having access to these benefits on a consistent basis.
But if those benefits were only granted after they passed a means test, their own net worth plays a significant role. If you leave them an inheritance, you could accidentally disqualify them. They will lose their benefits until they spend the inheritance, and then they will have to reapply.
You can often get around this issue by simply putting the money into a special needs trust. You still name them as the beneficiary, but the trust owns the assets instead of the individual, so they will not be disqualified from the benefits package that they already receive.
Of course, every situation is unique, but this helps to demonstrate why you need to carefully look into all of your legal options when setting up an estate plan.
