Friday, October 4, 2013
Planning for the needs of a disabled child can be difficult. One critical consideration is ensuring the child will remain eligible for government programs like Medicaid and Social Security’s Supplemental Security Income Program.
A disabled person with over $2,000 in assets is barred from these programs. Therefore, advisors must ensure there are no assets in the child’s name that would bar the child from an essential program.
Listing children as beneficiaries of trusts, wills, 529 accounts, group health plans, 401(k)s, and pensions will serve to disqualify them. A frequently-used approach is setting up a third-party, special-needs trust, which won’t disqualify a child but will place rules on how the money is used. A good way to fund these trusts is with the proceeds from a second-to-die life insurance policy, which lessens premiums.
See Elliot M. Kass, Estate Planning for Clients with Disabled Children, Financial Planning, Sept. 30, 2013.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.