July 20, 2011
Authored by: Tanya Harvey and Jordan Ware
To ensure your estate is distributed according to your wishes.
If you die without a will and have assets in your own name, your assets will pass by your state’s law of “intestate succession,” which sets forth who in your family will receive your estate and in what order. This distribution may be contrary to your wishes and may result in your child being denied eligibility for public benefits (generally, an individual may not receive SSI or Medicaid if they have more than $2,000 in assets). For example, if you die without a will in some jurisdictions, the law requires your assets be divided between your spouse and your child, even though you may want your assets to go to your child only if your spouse is not alive. In addition, a court would have to appoint a legal guardian that is accountable to the court to invest and manage your minor child’s inheritance, until your child reaches age 18. At that time your child would have full control of the assets, which may not be your desire.
To maintain your child’s eligibility for public benefits.
If your child receives an inheritance that causes your child to exceed the $2,000 allowable asset limit, he or she could lose public benefits or be ineligible to receive them. The assets must be spent down until they are below the limit before your child can reapply for benefits. As it is increasingly difficult to get benefits, you do not want to jeopardize them. A properly worded special needs trust would allow the inheritance to be used to improve your child’s quality of life, instead of spending the money on living and/or medical expenses that could be covered by public benefits.
To name a guardian for your child upon your death.
If you are the parent of a minor child, you are deemed the natural guardian of the child. When the child becomes an adult, the parent’s authority ends unless a court declares the child incompetent. As a parent of a minor child, you can designate a person who you want to be the guardian of your child in your will. The failure to name a guardian could result in a lengthy court process to determine the best interests of your child. We also suggest that if you have an adult child with a disability, you include a provision in your will naming who you would want as a guardian, if your child needed a guardian at your death. This provides the court some guidance in making their decision. Before you designate a guardian and any successor guardians, you should discuss with them the responsibilities they will face and obtain their agreement to become guardians.
To name a trustee for your child’s property.
Unless you put your child’s property in trust, your child will receive it outright upon reaching the age of majority, whereas a trust can last for your child’s lifetime, if necessary. The trustee will manage the trust assets and pay out the income and principal according to the terms you set forth. Often parents chose an individual other than the child’s guardian, so there will be a check and balance system, or because they want another family member involved with their child. The person must be trustworthy, have solid financial judgment (or be knowledgeable enough to have someone help them with investments), and have personal knowledge and an understanding of your child’s needs. If you have a child with special needs, this trust may last for your child’s lifetime, so you should also name successor trustees.
To avoid liability for the cost of care for state residential programs and other claims for benefits provided to your child.
With careful planning and drafting, it is possible in most states to ensure that your family’s and your child’s assets will not be subject to claims of the state for residential care for your child.