When planning your wealth legacy, you may have considered leaving assets to a loved one with special needs. Although this generous act can positively influence your loved one’s lifestyle, there are potentially serious consequences. If you have named a loved one who is eligible for disability payments as a beneficiary in your will, you need to consider how those assets may affect your loved one’s ability to continue collecting disability.
SSI and SSDI
Supplemental Security Income and Social Security Disability Insurance offer limited income protection for individuals suffering from an injury or illness who are unable to work. Although SSDI is an entitlement program that anyone who has worked more than a quarter of each of the past 10 years can take advantage of given an approved claim, SSI is a strictly monitored, need-based program. SSI recipients may only keep up to $2,000 in assets before losing eligibility.
Without proper planning, your loved one would have to spend or give away the money immediately to avoid losing SSI, a potentially disastrous turn of events for the person you are trying to protect.
Inheritance Planning for SSI
The good news is that with a little extra planning, you can leave assets to your loved one without harming his ability to collect SSI. The 1993 Omnibus Budget and Reconciliation Act allows the establishment of a special needs trust that benefits an individual receiving SSI without affecting payment eligibility. That means you can order your assets transferred into a trust that names your loved one as a beneficiary.
Your loved one will continue to receive government benefits while also earning the income provided by the trust. In this way, you can assure your wishes are fulfilled while also preventing the unnecessary spending that might occur otherwise.
OBRA includes a payback provision that may require the trust to repay the government agency in full after the death of the trust beneficiary. They must pay for the SSI benefits received during the period the trust was in force. Also, because the rules guiding trust creation are complex, you’ll need to hire an experienced attorney who can assure a smooth transfer.
You’ll also need to determine how the assets will be distributed, name an executor, and provide clear instructions to avoid issues after the trust payments begin.
Preparing the Trust for SSI and SSDI
There is no substitute for expert legal advice. Consulting a qualified and experienced attorney will help you avoid the pitfalls associated with unclear state and federal laws.
Contact the law office of Lisa M. Ritacco if you have questions about SSI or if you’re the future beneficiary of an inheritance.