Estate Planning for Parents of Children with Disabilities

Many people in Arizona with disabilities rely on public benefit programs such as Medicaid or SSI for income.  These benefits are needs based, however, so only those who meet eligibility requirements qualify for them.  Applicants do not qualify solely because they have a disability, but because they also pass specific financial eligibility tests.  In other words, those with too many resources, or who earn too much income, do not qualify for these programs.

Financial eligibility requirements can make it difficult for a disabled person to retain his public benefits after receiving an inheritance.  Even an inheritance left with good intentions can cause complications for the person it was intended to help.  However, Special Needs Trusts provide a way around this issue, and allow people with disabilities to receive an inheritance without affecting their eligibility for public assistance.

How does a Special Needs Trust work?

Special Needs Trusts are the safest way to leave an inheritance to somebody with a disability.  The trustor establishes the trust and names a trustee, who must spend the trust funds appropriately.  Trust funds should supplement public benefits to ensure that the beneficiary is adequately cared and provided for.

Before assuming responsibility of a Special Needs Trust, trustees must familiarize themselves with trust expenditures that public benefit programs allow.  ALTCS (Arizona Long Term Care System) and SSI disqualify recipients if a trustee gives them Special Needs Trust funds outright.  On the other hand, trustees can spend Special Needs Trust funds to purchase the following types of items for recipients of public benefits:

  • Furnishings
  • Personal effects
  • Co-pays
  • Vacations
  • Personal care attendants
  • Automobiles
  • Medical expenses

Why should Arizona parents create a Special Needs Trust for their disabled child?

Public benefits typically do not provide recipients with enough assistance to live life as fully as they would like.  At the same time, those with too many resources do not qualify for public assistance.  This means that somebody who is eligible for public benefits can be disqualified immediately upon inheriting money, property or other assets.  Therefore, parents of children with disabilities must be careful not to disqualify their child from public assistance when leaving them an inheritance.  Establishing a Special Needs Trust is oftentimes the only way for parents to accomplish this.

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