If you have a niece or nephew that has disabilities, especially if he or she is receiving (or may someday receive) some type of government assistance, then it is important that you keep in mind that special needs children have unique planning requirements. 

As much as you would like to leave that child a special monetary gift in your will or trust, just leaving the child money outright can jeopardize the child’s chance of receiving important public benefits in the future.

Unfortunately, there are many misconceptions out there and even well-meaning people don’t understand the issues and give bad advice.  The number one mistake I see is to disinherit the child, which isn’t necessary.

Instead, you should consider establishing a special needs or supplemental needs trust.  If done properly, a special needs trust is a legal tool that can protect the disabled child’s public benefits and help them maintain their lifestyle.  

Without this critical tool in place, an inheritance left outright to a disabled child could interrupt their eligibility for Social Security or Medicaid in the future (which is often the only health care option available!)  Instead, a trust helps to ensure that the child receives such financial benefits without actually having assets in their name—thus leaving all government benefits intact.

Protecting your special needs niece or nephew starts by getting educated and empowering yourself with the information you need to ensure your loved one is protected—no matter what!

Darlynn Morgan is an attorney, speaker, an auntie (and a mom!) Darlynn makes it easy for your family to talk about and plan for tough subjects like money, death and taxes. Visit www.MorganLawGroup.com for more resources on how to make sure the kids you love are totally protected if the unthinkable happens.

Published: July 12, 2011