How to do your estate planning when your child is on disability or Medicaid

Attorney Tom Olsen: We do a lot of estate planning for people, wills, trusts, and everybody's situation's different but they're a good percentage of our clients have children that are already on governmental benefits, some kind of disability. They've had a work injury, or they were born with something that doesn't allow them to work full-time, or they've got some mental illness that doesn't allow them to work full-time. They're on governmental benefits. I think generally, it might be social security disability.

Attorney Robert Hidock: Yes, I'm seeing that a lot as well.

Tom: First thing I want to let you know is that if you're a parent out there and you hear this thing thinking, “Oh.” You might be embarrassed about it, but don't be because there's a lot of people out there in the same situation so don't be concerned about it. The other thing is that if the parent were to simply leave that child a portion of mom and dad's estate, their benefits would end until they spend that portion that they inherited, then the benefit could kick in. That's not the way to do it. The way to do it would be for mom or dad to set up a special needs trust

Robert: As part of their living or revocable trust, there's a spinoff trust, the special needs aspect of it. The good part or the best part about-- and it's almost like pre-planning, by including that in your trust that you can pick the beneficiary. The trustee will basically hold all the money for their child who has special needs and then will buy them things out of the trust. If that person or the child passes eventually, then their regular plan of distribution follows through for beneficiaries.

However, let's say they fail to plan, and they don't have a special needs trust, and they die, and then the money goes to their child, we can still take care of them but it's an extra step. We have to do a special needs trust for the disabled under 65. The downfall to that is after their child passes, the beneficiary becomes the State of Florida. If they're extremely proactive and get that special needs trust done when they're doing their revocable living trust, they never have to worry about the State of Florida getting any of their money.

Tom: That's a special needs trust and we use it quite often. Occasionally somebody will say, “Hey Tom, I've got relations, brothers, sisters, parents that want to also leave money to my child who has special needs.” We set up that trust in such a way that not only is mom and dad funding it but grandma and grandpa might be funding it as well too.

Robert: Absolutely.

Tom: That's a special needs trust for people that they're out there that are on governmental benefits. The way I've always described it is that when this money goes into the special needs trust, that money is there to supplement their governmental benefits not to replace their governmental benefits. The governmental benefits that people get, hey, it's money but it's not going to go all that far. The special needs trust money can be used to help them pay their cell phone bill, or help them pay rent, or even buy them a house if they wanted to.

Robert: Depending on their disability, they can buy them a house, they can buy them a car, they can pay rent. The only thing they really can't do is just give them cash.

Tom: It's a great tool for people who have children that are already on governmental benefits to get them to keep the kids on the benefits but also get the benefit of the money that mom and dad are leaving to them.

Robert: It is definitely the best of both words.

Tom: Yes. Folks that opens up a line for--

Speaker: One minute.

Tom: Oh, actually, we're about done for the day so what I want to tell you is this. Is that the Olsen Law Group, we are always happy to give you a few minutes of free legal advice right over the telephone. Monday through Friday, 9:00 to 5:00, you can call the lawyers at the Olsen Law Group at (407) 423-5561. If you go to our webpage olsenlawgroup.com, you'll find a page for each one of the lawyers. On each lawyer's page, there's three big red buttons. One is call, two is text, three is email. Those will go straight to that lawyer. You don't have to go through the front desk to contact and have conversations with lawyers at the Olsen Law Group. Again, if you want to call the main number though, (407) 423-5561.

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