Why Updating Your Beneficiary Forms is Crucial When You Have A Special Needs Trust

A Special Needs Trust is an important tool to utilize if you have a child or grandchild with disabilities whom you wish to leave an inheritance when you pass away.

In order to receive public benefits such as Medicaid and Supplemental Security Income (SSI), your child can only have very limited resources (usually less than $2,000) to maintain eligibility.  That means that any inheritance received by your child could result in their disqualification for the important benefits on which they rely.

A Special Needs Trust helps to avoid this outcome by putting the inheritance into an entity that is not technically “owned” by your child.  Once the trust is set up, it is then managed by someone of your choosing, called a trustee, who would control the money and make purchases for the benefit of your child. If the trust is created and administered properly, the funds in the trust will not jeopardize your child’s ability to collect Medicaid or SSI benefits.

However, it is important to note that a Special Needs Trust only works if the assets you wish to leave your child go into the Special Needs Trust. For most of your assets, this can be accomplished with your will or by simply amending the titles that dictate how your assets are owned.

However, some assets may pass outside of your will by law. Life insurance and certain accounts are set up with a designated beneficiary listed.  Likewise, accounts with payable on death beneficiary designations are all examples of assets that can be passed directly to someone outside of a will.

Therefore, it is important that you make the Special Needs Trust, not the child, the designated beneficiary of any account that pass outside of your estate.

If you do not, the child will receive these assets outright which will affect eligibility for public benefits. This is a terrible outcome that can simply be avoided by making sure your child’s Special Needs Trust is properly named on all accounts that have a named beneficiary.

If you currently have your child directly listed as beneficiary on any account, I strongly encourage you to change these as soon as possible. But, the first step is to establish a Special Needs Trust. To do so, we invite you to call the Law Office of Sheri R. Abrams at (571) 328-5795 to schedule an appointment.