One of the more detail-sensitive aspects of estate planning involves spend-down strategies. These strategies aim to reduce your countable income for the purposes of qualifying for certain governmental benefits. Tools like trusts and spending on medical debt all fall under potential spend-down strategies.
The usual context of spend-down is you qualify for Medicaid or another program that has rigid income requirements to benefit. But this concern may also involve your special needs children — whether they are adult-aged or not.
First-party trusts
In the event of your death, your special needs child stands to inherit a portion of your accumulated wealth. This is a double-edged sword, however, since the inheritance may cause them to lose eligibility for government benefits until they spend those funds.
According to The Arc Georgia, up until 1993, a person receiving government assistance was not able to place their own money into a Special Needs Trust. The new law helps people place funds into a special needs trust to provide a safe harbor for that money without endangering their benefits.
Third-party trusts
One way to avoid this confusion is to take care of it ahead of time. A third-party trust refers to any arrangement that funds a trust at the time of your death. You might specify this in your will or life insurance policy.
There are ways to keep your wealth in the hands of your loved ones. If you have a special needs child, you have options to help protect their future. When considering these options, it is important to communicate with your family and other resources to create the kinds of arrangements that fulfill your wishes.
