How to Protect Inheritance Left to Disabled Beneficiary

by | Mar 17, 2018 | Uncategorized | 0 comments

For heirs who are receiving benefits from the Disability and Supplemental Security Income program (SSI), an inheritance can be problematic.

The benefits under that Social Security  program are only available to those with disabilities so long as they do not have the financial means to pay for their own care.

Among other things, that means that the receipt of an inheritance by a person receiving SSI benefits will cause those benefits to be suspended until the heir has spent the inheritance.  Then the benefits will start up again.

But, with a little foresight, it is possible to leave an inheritance in a Living Trust or Family Trust that will not cause the SSI benefits to be suspended.  That can be done by setting the trust up as a Special Needs Trust or a Supplemental Needs Trust.

The trust assets will continue to be held by the trustee of that trust – rather than being distributed outright to the special needs beneficiary.  By leaving them under the control of the trustee, Social Security cannot count those assets as belonging to the beneficiary unless and until they are actually received by the beneficiary.

The trustee of the Supplemental Needs Trust will parcel the inheritance out in a manner that elevates the standard of living of the beneficiary.  The benefits from the trust effectively become a source of enrichment for the beneficiary instead of being the sole resources available for the care of the beneficiary.

This arrangement will extend the benefits of the inheritance far beyond the benefit that might be enjoyed under an outright inheritance.

So, for any parent or grandparent who wishes to bless an heir who is receiving benefits under the SSI program, careful consideration should be given to the use of a Supplemental Needs Trust.

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Daniel Patchin

Barry Peters