Gifts can actually hurt your special needs child’s financial future. What normally would be considered a wonderful, thoughtful gift can turn out to be sabotage if you don’t make the proper arrangements for gifting.
Families who have children with special needs have significantly more financial demands than most others. There are medical visits, therapies, equipment, schools, and a host of other things that tax a family’s savings. So when gifts are given by family and friends, it is hugely appreciated. The problem: the gift could jeopardize the child’s financial future. That’s because government benefits like SSI (Supplemental Security Income) and Medicaid, important services the child will need or want throughout adulthood, have a required maximum amount of allowable income resources in order to qualify. That amount for SSI is only $2000. Most often, Medicaid eligibility is based on SSI eligibility so it’s critical that he or she be SSI qualified.
How then can gifts be given without destroying eligibility for benefits? If you are the parent or guardian you must have a special needs trust created in which all gifts and other savings can be deposited. If you are the gift-giver you must make the trust the recipient and NOT the child. You can give as big an amount as you like. When the funds go to the trust and not the child they won’t be counted as the child’s.
This extends to money gifted from a will, legal settlements, and any other financial instrument. The funds must name the trust, and not the person as the beneficiary. Putting assets in an UGMA or UTMA account are not acceptable either. Once the child becomes a legal adult that money will be counted as his or hers.
The funds in the Special Needs Trust can be used for anything that improves the beneficiary’s quality of life. It can go for special therapy, equipments, and caregiving not covered by Medicaid. Books, computers, toys, hobbies, travel can all be purchased as long as they are not already covered by a government program.
I cannot stress enough how important it is to use a knowledgeable special needs trust attorney. There are a variety of trusts, and you must have the correct one for your family situation. For instance, money from a medical settlement may need placement in a different type of trust than money received from an estate. Some people think they can bypass the expense of paying an attorney to set up a trust by letting a friend or relative hold the money. That’s the 3-D mistake! All the money could be lost or taxed away due to that person’s divorce, death, or debt.
Trusts are complex, legal instruments that must be chosen, drafted, and implemented properly. Let the professionals do the difficult part so that giving and receiving gifts will be easy.
If you have a specific question about your situation or would like more information give me a call at 443-756-9281. You can also reach me by email at firstname.lastname@example.org.
Wendy Goldband, MSW, is a Registered Representative and Insurance Producer with an expertise in special needs and long term care planning. She is the former Long Term Care Senior Marketing Manager for Crump Insurance Services, the largest life insurance brokerage in the nation. Author of Breaking Autism’s Barriers and Dangerous Encounters:Avoiding Perilous Situations with Autism, she believes in both the physical and financial safety of your special needs child.