SeniorTruth

Question: My niece Trudy was born with a disability, and cannot support herself. She’s now in her 40s. I love her dearly, and want to leave her an inheritance to make sure she’s provided for. But I’m worried that the inheritance will make her lose the governmental benefits she now receives and depends on. What should I do?

Answer: Creating the best results for Trudy calls for what you are doing thinking and planning ahead. Take the right steps and Trudy can maintain the government help she needs, while you provide additional help for the many quality-of-life things government help won’t cover. Things like a bus pass, car, stereo, clothing, health club dues, a computer, classes, laundry, funeral expenses, home furnishings, haircuts, insurance, magazine, music lessons, vitamins, pets and supplies, sporting goods, taxis, telephone service, tickets to concerts, utility bills and vacations.

Initial steps
First, check with Trudy’s parents and siblings to see what advance planning they’ve done or are thinking about for Trudy’s benefit. Perhaps you can collaborate with several family members and set aside funds for Trudy’s needs. If she is able, Trudy should participate in the discussions.

You should also consider the amount you might leave for Trudy larger amounts likely call for more formal planning. And think about what you want to happen to any money left when Trudy dies.

Further, you must identify precisely which government benefits Trudy depends on now and will be likely to need in the future. If she participates or will participate in programs like SSI and Medi-Cal, an outright inheritance would cause her to lose those needed benefits and would complicate her need for legal services.

Two approaches
Assuming you’ll want to avoid an outright inheritance for Trudy, there are two basic approaches. The informal approach would give the inheritance to other family members, who would have no legal obligation (but a moral duty) to look out for Trudy. This approach depends on their following through and using the funds solely for Trudy. Spending and creditor problems, divorce, death and other issues can disrupt this approach.

The more formal approach calls for you or another family member to create a special needs trust. This approach sets aside money for Trudy in trust, to be managed and used for Trudy’s benefit by a trusted family member or other trustee. For a special needs trust arrangement, you need to think of the “three D’s,” documents, doers and dollars.

• The documents must be carefully prepared to comply with the government program rules and provide the most flexibility for meeting Trudy’s needs.
• The doers are the trusted people you’ll select to serve as trustees and respond to Trudy’s needs. They might retain a professional care manager to assist them.
• To decide the dollars to set aside you should focus on Trudy’s living situation, desires and needs keeping in mind that differing living situations and care and personal needs can require largely different amounts of money.

You can set up a special needs trust today to receive money (be funded) at your death. But perhaps a better approach is to create the trust today and fund it now with a starter amount, so you’ll get to see it in action during your lifetime. The latter approach will give you a chance to make adjustments if you see that the trust isn’t working quite the way you want.

In creating a special needs trust, be sure to use an experienced and capable attorney. The rules are tricky. The ideal attorney will be someone with whom you are comfortable, who has created dozens of these trusts and who devotes a large portion of his or her ongoing practice to helping trustees manage active special needs trusts.

Thanks for your question and for thinking ahead about Trudy’s future.