[i’stāt plan-ing] – A well thought out process for distributing your estate to people and institutions you wish to benefit.
When thinking about estate planning, your approach may be that of many Americans—distribute the estate to your kids as soon as possible after your death. That’s a workable plan for many. But it doesn’t take into account whether some of your heirs are spendthrifts, can’t manage money, have addictions that would quickly eat up their inheritance, or if you have a disabled heir.
People with physical or cognitive disabilities may qualify for taxpayer sponsored public or privately funded benefits to help with living expenses since the individual may not be able to work. Distributing assets directly to a disabled person may disqualify them for such benefits.
For example, disabled individuals may qualify for Supplemental Security Income (SSI) through Social Security. To apply for SSI benefits, a person has to spend down most of their savings and any funds that can be used without restrictions. When a disabled individual receives an inheritance directly, it can disqualify them from receiving SSI and Medicaid health insurance. But there are ways to pass on assets that won’t disqualify the individual from government benefits they are eligible for.
Special Needs Trust
Funds can be held in a Special Needs Trust (SNT), which doesn’t reduce present benefits or disqualify them for future benefits.
A first party SNT can be created using the disabled person’s own assets, or a third party SNT created and funded by someone else, for example, a parent or grandparent.
Able Account
Another option is the ABLE account. People with disabilities can save up to $100,000 in their own name without affecting their SSI benefits or Medicaid eligibility. They can also roll over money from a 529 Education Savings plan into an ABLE. The money can still be used for college, but it’s also eligible for anything that will improve their health, independence or quality of life.
Pooled Trust
A Pooled Trust may also be an option. The Pooled Trust contains the funds of many beneficiaries and is managed by a nonprofit organization. Sub-accounts are created for each beneficiary and each account receives a share of the Pooled Trust’s earnings.
Calculating a Disabled Person’s Benefit
When the government estimates a disabled individual’s eligibility for benefits, they do not include the value of personal property, household goods, one automobile or the home that person lives in. Other assets in the individual’s name, such as assets distributed to them directly from your estate, are included, so this needs to be considered in your estate planning when you are thinking about leaving assets to a disabled heir. A well thought out estate plan, which includes advice and guidance from an estate professional, will save your disabled heir from financial heartache they don’t need to experience.
Disclaimer
This information is presented for informational purposes only and does not constitute an offer to sell, or the solicitation of an offer to buy any investment products. None of the information herein constitutes an investment recommendation, investment advice or an investment outlook. The opinions and conclusions contained in this report are those of the individual expressing those opinions. This information is non-tailored, non-specific information presented without regard for individual investment preferences or risk parameters. Some investments are not suitable for all investors, all investments entail risk and there can be no assurance that any investment strategy will be successful. This information is based on sources believed to be reliable and Alhambra is not responsible for errors, inaccuracies, or omissions of information. For more information contact Alhambra Investment Partners at 1-888-777-0970 or email us at info@alhambrapartners.com.
