Grandparents want the best for their children and grandchildren, often making gifts while alive, or provisions for their loved ones through estate planning. Grandparents who are in a position to leave money to grandchildren often want to do something for their grandchild(ren) with special needs. They worry that they may need additional resources or assistance for a quality life. Grandparents are often told not to leave their grandchild(ren) with special needs any assets because they may lose government benefits. People are unsure about what to do or not to do.

Grandparents can leave money to their grandchild(ren) with special needs. There are very special ways to do it!  Money has to be left in such a way so that government benefits are not lost.  Assets in excess of $1,500 will cause the loss of certain government benefits for the person with special needs.

Money should not be left to the grandchild directly, but should be left to a special needs trust. The special needs trust was developed to manage resources while maintaining the individual’s eligibility for government benefits. The trust is maintained by a trustee on behalf of the person with special needs. The trustee has discretion to manage the money in the trust and decides how the money is to be used. The money must be used for supplemental purposes only. It should only supplement, or add to benefits (food, shelter or clothing) that the government already provides through Supplementary Security Income (SSI). It must not supplant or replace government benefits. If properly structured by a knowledgeable special needs attorney, the special needs trust assets will not count towards the $1,500 limit for an individual.

Brief Summary of Do’s and Don’ts!

Do’s:

1)      Make provisions for your grandchild(ren) with special needs. Leave money to the child’s special needs trust. The special needs trust is the only way to leave money without losing government benefits.

2)      Coordinate all planning with the child’s parents or other relatives.  Notify the parents when you plan for grandchild(ren).

3)      Leave life insurance, survivorship life, and annuities to the child’s special needs trust. The special needs trust can be named as the beneficiary. When the insured or annuitant dies, the death benefit is paid to the special needs trust. The special needs trust then has a lump sum of money to be used in caring for the grandchild(ren) with special needs.

4)      Consult with trained financial and legal professionals who have experience in special needs estate planning.

5)      Review your existing estate plans.  Assets left to your children per stripes may unintentionally go to your grandchild(ren) with special needs.

Don’ts:

1)      Do not disinherit your grandchild(ren) with special needs. Money can now be left to a properly drawn special needs trust.

2)      Don’t give money to your grandchild(ren) with special needs under UGMA or UTMA (Uniform Gift or Transfer to Minors Act). Money automatically belongs to the child(ren) upon reaching legal age, resulting in potential loss of benefits.

3)      Don’t leave money directly to a grandchild with special needs through a will. Money left will be a countable asset of the child and may cause the loss of government benefits.

4)      Don’t leave money to a poorly set up trust. Money left to an improperly drafted trust can result in the loss of government benefits.

5)      Do not leave money to relatives to “keep or hold” for the child with special needs. The money can be attached to a lawsuit, divorce, liability claim or other judgment against the relative.

Due to the complexity of federal and state laws, you may require specially trained professionals to help you plan for the future of your child(ren) with special needs. I will work with you and your tax and legal advisers to help you select the most appropriate product solutions to suit your specific needs and circumstances.

Contact Senior Financial Services Executive and Special Needs Financial Planner Gordon Homes, CFP®, ChFC, CLU, at (800) 903-6380 FREE ext. 5042, (317) 317-567-2005, or at ghomes@metlife.com for more information or to schedule a complimentary consultation.  Metropolitan Life Insurance Company (MLIC), New York, NY 10166. Securities products and investment advisory services offered by MetLife Securities, Inc. (MSI) (member FINRA/SIPC) and a registered investment adviser.  MLIC and MSI are MetLife companies. L0113301561[exp0214][IN]