Inheritance planning is a two-way street. As the giver, you have to inventory your assets and arrange for effective transfers. However, it is not as simple as slicing up a pie and handing out slices in the identical fashion to all recipients. The way that you hand out each slice is part of the equation. With this in mind, let’s take a look at the difference between a last will and a special needs trust in Cincinnati OH.
The most commonly utilized vehicle of asset transfer in the field of estate planning is the last will and testament. A last will is used to arrange for the distribution of assets that are in your personal possession at the time of your death.
There can be other interested parties beside the heirs to the estate. Creditors, including the tax man, could have claims against your estate. For this reason, the estate must pass through the legal process of probate before the heirs can receive their inheritances.
Probate can be time-consuming and expensive, and people often choose to avoid it. This however is a topic for another blog post.
Providing for an Heir With Special Needs
Now that we have touched upon the probate process let’s take a look at last wills and people with special needs.
You may see absolutely nothing wrong with naming someone with a disability in your last will. It is simply an act of generosity. However, if you use a last will to provide an inheritance to someone who has a disability, you may be doing more harm than good.
Most people who have special needs are receiving government benefits, including Medicaid and Supplemental Security Income (SSI).
It can cost literally millions of dollars over a lifetime to provide care for someone with special needs. These benefits are invaluable to those who are receiving them.
Programs like Medicaid and Supplemental Security Income are need-based. If you are in possession of resources that exceed $2000, you cannot qualify for Medicaid.
As a result, if a person who was receiving these benefits inherited a gift directly, his or her benefit eligibility could be lost until the inheritance was used up. In the end, the gift was useless.
Special Needs Trust in Cincinnati OH or Supplemental Trusts
If you have a person on your inheritance list who is receiving government benefits due to a disability, you can assist this individual by creating a special needs or supplemental trust for his or her benefit.
You can name a third party trustee who administers the assets that have been conveyed into the trust. Under program rules, the trustee may use trust assets for certain purposes that improve the quality of life of the beneficiary.
Because of the nature of these expenditures however, the individual does not jeopardize his or her eligibility for government benefits.
For more information on special needs and disability planning, please contact Zimmer Law Firm today at 513.721.1513 for a consultation.