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When a Gift Can Cause More Harm Than Good: Planning for Those with Special Needs

It’s been said that no good deed goes unpunished. This can ring true for those setting up estate plans for their family… even with the best intentions in mind. Who knew that drafting an estate plan, which leaves money to your beneficiaries, could actually do more harm than good to some of them? This exact scenario can arise from time to time when your beneficiary is receiving government aid or benefits, such as Social Security or Medicaid, because of a special need or a handicap. Careful estate planning must be considered in these situations.


It’s been said that no good deed goes unpunished. This can ring true for those setting up estate plans for their family… even with the best intentions in mind. Who knew that drafting an estate plan, which leaves money to your beneficiaries, could actually do more harm than good to some of them? This exact scenario can arise from time to time when your beneficiary is receiving government aid or benefits, such as Social Security or Medicaid, because of a special need or a handicap. Careful estate planning must be considered in these situations.

While leaving behind a sum of money to a beneficiary with special needs seems harmless and praiseworthy, such a gift can cause problems for the recipient beneficiary with special needs. The danger is accidentally disqualifying the beneficiary from the benefits and aid that he or she was receiving from the government. Many benefits and aid programs are provided on a needs-based system. If a beneficiary has too many countable assets, then the government could terminate the aid or assistance. Consequently, if your estate plan gives money to a beneficiary outright, who is receiving needs-based assistance, you may actually inadvertently cause that beneficiary to lose their eligibility for those funds.

With careful estate planning techniques, proper steps can be taken to mitigate the risks of causing a beneficiary to lose their benefits all because of an inheritance you left behind for them with good intentions. A possible solution could be the use of a special needs trust in your estate plan, wherein you create a trust for the beneficiary with special needs and direct their share of your inheritance to go directly to his or her special needs trust… not to the beneficiary directly. If the conveyance is properly executed and the special needs trust is properly drafted, the beneficiary should be able to benefit from the trust you have set up for them all while still remaining eligible for their government aid.

For more information on special needs trusts and estate planning that takes into consideration those with special needs, call our office to speak with an estate planning attorney.



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