The Listen to Lawrence Letter: Will funds in my Irrevocable Trust affect my son with special needs when he applies for benefits?
October 1, 2021
Dear Clients and Friends,
Although we discuss many Elder Law and Estate Planning strategies here in The Listen to Lawrence Letter, don’t forget that the firm also is deeply focused on planning for Special Needs. I am a founding member of the Special Needs Alliance which is dedicated to providing information, articles, resources, and highlights attorneys that concentrate in this area.
I have had an Irrevocable Trust set up by another Elder Law firm, about 5 years ago now. My intent in setting the trust up was to protect my assets for my two adult sons, one of whom has Special Needs (ASD), but has never applied for SSDI. Here’s the question that keeps me up at night…My son, who will be turning 34 in a couple of months, has still not been able to find any gainful employment. He has tried, but nothing works out, and I fear it never will. If and when he realizes this fact too, and he applies for SSDI or even SSI, will the money in this Trust hurt his ability to receive financial services? I asked the Law firm that set up my Trust, but they told me to speak with a Disability Law Attorney!
Most of you know that in addition to being an elder law and estate planning attorney, I am also a special needs attorney. What is a special needs attorney? It can mean many things to many people, but In my practice, it means I have prepared thousands of special needs trusts like the type necessary to protect your son’s inheritance. The skillset of a special needs attorney overlaps with a disability attorney. We certainly handle all the estate planning concerns for people with disabilities and their families, but we may not (although some do) apply for social security disability for you or your son. By the way, I am also a founder of the Special Needs Alliance, an invitation-only, national organization of the top special needs attorneys in this country.
Having said all that, what you have is an irrevocable Medicaid trust that, upon your death, will leave half to your son outright. This will only be a problem if (1) he cannot manage this money on his own and/or (2) he is on some government benefit, like SSI or Medicaid, that requires poverty for acceptance into the program. On the other hand, if he can manage money and is on Social Security Disability Income (SSDI) then all is fine because SSDI is not dependent on how much money you have. The severity of your son’s autism will be determinative here.
Assuming that you do not want him to inherit directly, then the terms of the irrevocable trust become important. Every irrevocable Medicaid trust I draft has a clause in it where you reserve the right to change the beneficiaries of the trust. This would include changing your son’s inheritance from him receiving it outright to a special needs trust for his benefit. The special needs trust would give him management of his assets by a trustee (sibling, aunt, or uncle?) and the ability to preserve his needs-based government programs like SSI and Medicaid. This reserved power to change the beneficiaries is called a POWER OF APPOINTMENT, which is the power to appoint a different beneficiary.
I would need to review your trust to see what flexibility we have to make this work for you.
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peace, health and happiness,
Lawrence Eric Davidow