Crafting an Estate Plan to Include Disabled Family Members

By: Kevin R. Albaum

Without proper planning, leaving an inheritance (or making a gift) to a disabled family member can cause the disabled person to lose their means-based government benefits such as Supplemental Security Income (“SSI”) and/or Medicaid. SSI is a federal government program that pays monthly cash ($771.00 maximum per month in 2019) to blind or disabled adults and children. To qualify for SSI, an individual must have under $2,000.00 of countable assets and very limited income. Medicaid is a Federal and State funded health insurance program that helps people with limited assets and income pay for their medical costs. A large portion of the Medicaid programs in Florida require a person to be disabled to receive benefits.

It is common for an individual to name their spouse and/or children as beneficiaries in their Last Will and Testament (“Will”) or Trust. However, what if your spouse and/or child is disabled… does the estate plan still accomplish your goals if you were to die? Unless you have created some form of a special needs trust to protect your disabled family member’s inheritance, your death could result in an unexpected loss of SSI and/or Medicaid to them.

A special needs trust (“SNT”) is a specific type of trust that is designed for disabled beneficiaries. A SNT is written so cash, real property, and other assets are available for the disabled person’s benefit while still allowing the disabled person to receive their means-based government benefits such as SSI and/or Medicaid. There are a few different ways to create a special needs trust. A Testamentary Special Needs Trust is a trust that is created within your own Will or Trust that only goes into effect when the creator of the Will or Trust dies. You can also create and fund a SNT for a disabled beneficiary during your lifetime instead of waiting for the testamentary SNT to go into effect upon your death.

The trusts I have discussed so far in this article are Third-Party Special Needs Trusts. This means they are set up by someone other than the disabled person and funds can be contributed to the trust by other donors as well. A Third-Party SNT can be named as the beneficiary of life insurance policies and retirement accounts, own investment accounts, or real property. A Third- Party SNT’s assets which not used for the disabled beneficiary during their lifetime can pass to other non-disabled beneficiaries upon the death of the disabled beneficiary (free from Medicaid Recovery Liens as the property in a Third-Party SNT never belonged to the disabled beneficiary).

Unlike the trusts discussed in this article, First-Party Special Needs Trusts are set up and funded with the assets (or injury settlement proceeds) belonging to a disabled person and no other funds can be contributed to this type of trust by any other donors. First-Party Special Needs Trusts are subjected to Medicaid Recovery Liens to reimburse the state of Florida upon the death of the disable person. Special Needs Trusts are complex to draft, fund, and administer without professional guidance at the onset. Therefore, if a SNT would be a beneficial part of your estate plan it is recommended that you discuss with a qualified estate planning or elder law attorney.

Kevin Albaum is an attorney in the Elder Law Practice at Clark, Campbell, Lancaster & Munson, P.A. Questions can be submitted online to thelaw@cclmlaw.com.

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Kevin Albaum

Associate at Clark, Campbell, Lancaster & Munson, P.A.

Kevin Albaum was born and raised in Tarpon Springs, Florida. He grew up spending a lot of time on the water either boating, fishing, wakeboarding, or jetskiing. Kevin earned his bachelor’s degree at Florida State University where he competed for FSU’s mock trial team across the country. Immediately upon graduation, he enrolled at Stetson University’s College of Law in Gulfport, Florida due to their specialty program in elder law and his passion for that specific field of the law.

Kevin moved to Lakeland, Florida to join Clark, Campbell, Lancaster, and Munson where he practices in the areas of: elder law, guardianship, estate planning, trust administration, and Medicaid. Since moving to Lakeland, he has become involved with the Alzheimer’s Association Walk Committee, EMERGE Lakeland, and VISTE.