Disinheriting A Child With Special Needs

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Sometimes family members consider disinheriting a child with special needs to avoid putting the child with special needs at risk of becoming ineligible for government assistance.  Parents may leave assets to a typical child instead of dividing the assets between the child with special needs and the typical child, and they rely on the typical child to care for their child with special needs.  This is not, however, the best way of protecting their children.

A typical child holding assets for the benefit of his or her sibling could voluntarily or involuntarily jeopardize the assets.  The assets could become subject to the claims of the typical child’s creditors such as through a judgment from an automobile accident, a bankruptcy or a divorce.  Additional risks are that the assets can be exhausted by the typical child so that they are no longer available to be used for the child with special needs or the typical child may marry someone who has less of an interest in insuring that the resources remain available for the benefit of their spouse’s sibling.

Instead of disinheriting a special needs child, a better way to protect that child is to allocate assets to a special needs trust for the benefit of that family member.  Transfers to a special needs trust generally will not create any period of ineligibility for that child.  The assets in a special needs trust can be available to provide for the care of the child with special needs to supplement, but not replace, monies available through government assistance.

Use of a special needs trust guarantees that the funds will be held only for the benefit of the child with special needs and not for any other individual or any other purpose, while ensuring that eligibility for government assistance is not comprised.

As the law continues to evolve on these matters, please note that this article is current as of date and time of publication and may not reflect subsequent developments. The content and interpretation of the issues addressed herein is subject to change. Cole Schotz P.C. disclaims any and all liability with respect to actions taken or not taken based on any or all of the contents of this publication to the fullest extent permitted by law. This is for general informational purposes and does not constitute legal advice or create an attorney-client relationship. Do not act or refrain from acting upon the information contained in this publication without obtaining legal, financial and tax advice. For further information, please do not hesitate to reach out to your firm contact or to any of the attorneys listed in this publication.

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