Gaithersburg: 301-670-7030
Baltimore: 410-769-5400
Frederick: 301-668-2100
Contact Us For Legal Help

Wills and Estates Blog

Think Twice About Designating A Disabled Person as a Beneficiary

Tuesday, September 20, 2016

Despite your good intentions, naming your disabled niece as the beneficiary of your life insurance policy may not do her any good whatsoever. In this final installment in this series, I explain why disabled beneficiaries should be handled with extreme caution. This advice actually applies to all manner of property given to a disabled person - including property distributed under a Will. The reason for caution is this: an inheritance from any source could disqualify the disabled person from receiving public benefits.

Many disabled people (children and adults) receive disability benefits through the Social Security Administration (SSA). The SSA administers two separate disability programs, disability insurance and supplemental security income (SSI). (See Have I Worked Enough to Qualify for Social Security Disability Benefts?). The SSI program is means tested. Thus, in addition to proving disability, the applicant must be below a certain level of means (e.g. income and resources). SSI benefits are particularly important as the disabled person receives not only a monthly cash benefit but health insurance through Medicaid. A sudden increase in resources may disqualify the person from both their cash benefits and, more importantly, Medicaid.

Imagine this situation. You loved your disabled niece so much that you named her as the beneficiary of your $100,000 life insurance policy. After your death the insurance company sent her a check for $100,000. Your niece (or her guardian) deposited the check into her account and the next month SSI notified her that her monthly checks were stopping and that she is no longer eligible for Medicaid. Your niece then used the life insurance proceeds to pay for doctor’s bills and basic survival as she had no other income. A year later she again is eligible for SSI and Medicaid as she has exhausted the $100,000. What exactly did she get as a result of your generosity? Nothing.

There was a way to have made your generosity count. A special or supplemental needs trust (SNT) is a trust that receives property and holds it for the benefit of a disabled person. If the SNT was drafted correctly, your disabled niece could have received the life insurance proceeds and still qualified for SSI. Thus, she could have continued to receive her cash payments and Medicaid. A properly drafted SNT does not impact SSI eligibility because a) the money is owned by the trust (not the disabled person) and b) the money in the trust is not available to the disabled person for basic needs such as food, shelter, and housing.

SSI benefits are for food, shelter and housing. If the disabled person has access to trust funds that could pay for food, shelter and housing, the trust funds are considered “available” to the disabled person. These available resources would most likely disqualify the disabled person for SSI benefits.

But what’s the point of putting the money into this SNT if your niece cannot use the money for food, shelter and housing? Because our niece can use if for everything else! She could buy a computer, a car, or go on a vacation! So long as the funds are not used for food, shelter and housing, they can be used for anything else. In this way your life insurance proceeds could be used to enhance the quality of her life.

It should be apparent at this point that if your estate planning involves property going to a disabled person it is imperative that you discuss your options with a qualified estate planning attorney.


Recent Posts


Tags


Archive

    RSS

    What Our Clients Say

    Known for our unwavering commitment to clients, for our integrity, and for delivering the best results, our clients continue to refer their friends, families and neighbors to us for their legal needs.


    "One year ago today I made the call to your office. The best decision I could make. I wanted to share with you how impressed I am with your staff and your professionalism."

    Heather P.


    "Craig did a great job representing me! He's the lawyer I have trusted with my legal needs because he's professional, knowledgeable, and keeps me informed about my case."

    Jaclyn K.


    "I would like to express my gratitude for your efforts and dedication for my disability case. It's has been quite a long and upsetting process but you have handled my case in an extremely competent and responsible manner."

    Leo H.


    "I have recommended Mr. Feldman to several of my friends and colleagues and have heard nothing but excellent reviews. He is the best lawyer I have ever used."

    Martin


    "I received the check today. I could not believe it until I saw the check. Thank you so much. You have improved my family's quality of life tenfold."

    Mike F.


    "These guys go above and beyond! They always have your best interest in mind."

    Mike W.


    "You have been kind throughout this process and I appreciate your professionalism as well as your gentle concern. Thanks for helping us and all the others who need your legal expertise. We are grateful."

    Nancy F.


    "Thanks to Mr. Shultz's aggressive and professional work ethic style I was able to receive the medical services and compensation pertaining to my case."

    Navdeep C.


    "I can honestly say this firm is simply TOP NOTCH! They not only have handled countless cases for my members that require their services, they also have gone well beyond their "scope" to help some of my folks in other areas of need. "

    Rick H.


    "The attention and professional care the staff has taken toward my needs has always been excellent. I have no complaints nor worries that my issues discussed are not addressed."

    Tim T.


    "I just got off the phone with Craig and let him know how thankful we are to you, him and Ken for all your efforts – you are all really terrific to work with!"

    Val K.


    Locations Throughout Maryland, Virginia & Washington DC

    Gaithersburg Office

    481 N. Frederick Avenue, Suite 300
    Gaithersburg, MD 20877
    301-670-7030 / 800-248-3352
    Fax: 301-670-9492

    Lutherville Office

    1301 York Road, Suite 600
    Lutherville, MD 21093
    410-769-5400 / 800-248-3352
    Fax: 410-769-9200

    Frederick Office

    30 W. Patrick Street, Suite 105
    Frederick, MD 21701
    301-668-2100 / 800-827-2667
    Fax: 301-668-2000

    Subscribe To Our Newsletter


    TOP