There are invariably going to be a number of different people on your inheritance list. Each person is in a unique situation. You should take this into account when you are planning your estate, because there is no one-size-fits-all approach.
There are various different ways that you can arrange for assets to be transferred to your loved ones after you pass away. The optimal course of action will vary on a person by person basis.
For example, you may have a spendthrift heir on your inheritance list. Under these circumstances you may be concerned about this person burning through his or her inheritance too quickly. You can account for this possibility by making the individual in question the beneficiary of a spendthrift trust.
This is just one of many possible scenarios.
Special Needs Planning
What if you want to leave an inheritance to a person with a disability who is receiving government benefits? People with disabilities often require expensive care and treatment that may be required over the course of a lifetime. This can wind up costing millions of dollars.
Many people with disabilities rely on Medicaid to pay for this care and treatment. Medicaid is a program that is only available to people with significant financial need. To qualify, you must demonstrate a certain level of need.
If someone who was receiving Medicaid benefits was to receive a large inheritance, he or she may lose his or her eligibility.
If you want to leave behind assets for the benefit of someone with special needs you may want to create a special needs trust. These trusts are designed in a way that allows the trustee to utilize trust assets to enhance the quality of life of the beneficiary.
Monies can be spent to provide for the supplemental needs of the beneficiary without impacting government benefit eligibility.
To be clear, the beneficiary with special needs does not handle the funds that have been conveyed into the trust. When you create a special needs trust (alternately called a supplemental needs trust) you include the choice of a trustee in the trust agreement. The trustee can utilize trust resources for the supplemental needs of the beneficiary.
Individualized Attention Is Key
You will see do-it-yourself estate planning documents being sold on the Internet. If you were to “fill in the blanks” as it were on a generic last will, you could be inadvertently doing more harm than good. Because of a lack of information, you may not know that the inheritance that you are leaving to a person with special needs may jeopardize his or her benefit eligibility.
To be certain that you are doing things correctly, discuss your unique personal situation with a licensed estate planning attorney before taking any action.