Grandparents play a unique role in the lives of their grandchildren. Typically, they get to have all of the fun with little of the responsibility where their grandchildren are concerned. At the same time, they are able to pass down their wisdom and life lessons to their grandchildren, providing them with invaluable advice and guidance. Grandparents also frequently include their grandchildren in their estate plans. Usually, including a grandchild in your estate plan requires nothing more than deciding what you wish to gift to him/her and how you wish to make the gift; however, if you the grandparent of a child with special needs it is imperative that you include special needs planning in your estate plan or your well-intentioned gift could do more harm than good.
Traditional Estate Planning Strategies
Traditionally, grandparents include grandchildren in their estate plan using one of two strategies. The first involves a direct gift of money or assets made in a Last Will and Testament. This method results in the recipient — in this case a grandchild –receiving the intended gift after the probate of the estate is concluded. If the intended recipient has yet to reach the age of majority, however, the child cannot receive a direct gift because minors cannot legally own property and, therefore, cannot directly inherit from an estate. Instead, someone must hold the assets until the child reaches adulthood. This brings us to option number two – using a trust to make gifts. Grandparents often set up a trust just to gift to grandchildren. While both options work in most cases, they may not work if your grandchild has special needs.
The Problem with Gifting to a Grandchild with Special Needs
The danger in making direct gifts to a grandchild with special needs is related to the need to qualify for assistance programs. The law considers anyone to be a legal adult at the age of 18 without regard to mental or physical capacity. As an adult, your grandchild must qualify on his/her own for much needed assistance programs such as Medicaid, Food Stamps, and Supplemental Security Insurance (SSI). Your grandchild will likely need the benefits from these programs to help cover medical expenses, housing, and food assistance. The problem is that these programs use income and asset limits that cannot be exceeded by applicants/recipients – and the limits are low ($2,000 is the asset limit in most states). The well-intentioned gift you leave your grandchild could put your grandchild’s assets over the program limit, resulting in disqualification is he/she is already receiving benefits or ineligibility if he/she applies as a new applicant.
How Can Special Needs Planning Help?
A special needs trust, also referred to as a “supplemental” needs trust, is a specialized irrevocable living trust that allows you to make gifts to your grandchild without jeopardizing his/her eligibility for assistance. For a trust to be recognized as a special needs trust by SSI, Medicaid, or other assistance programs, very specific language must be used and the trust must be drafted properly, which is one of the many reasons it is in your best interest to have a North Dakota special needs planning lawyer assist you. Once created, you can transfer assets into the trust to be used to supplement the care provided to your grandchild by programs such as SSI and Medicaid. In addition, other family members, such as your children (the child’s parents) can contribute to the trust and the trust may continue to provide supplemental care for your grandchild long after you are gone. The key to providing for your grandchild with special needs is to consult with a special needs planning attorney early on to ensure that the assets you wish to leave for your grandchild actually benefit, not harm, your grandchild financially.
Contact a North Dakota Special Needs Planning Attorney
For more information, please download our FREE estate planning worksheet. If you have additional questions or concerns about how to include special needs planning in your estate plan, contact the experienced special needs planning attorneys at DeBruyckere Law Offices by calling (603) 894-4141 or (978) 969-0331 to schedule an appointment.
Daniel DeBruyckere
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