Estate Planning -Planning for a Disabled Beneficiary


When working with an attorney to prepare your estate plan, you will need to decide who you want to leave your assets to upon your death. What if your first choice of beneficiary does not survive you? A carefully drafted estate plan will designate back-up beneficiaries in the event that your first choice predeceases you.

But what if your designated beneficiary is disabled?

While it is true that an unexpected inheritance can be a blessing to those on the receiving end of the gift, but believe it or not, coming into even a couple thousand dollars can create a huge headache for a disabled beneficiary. A disabled individual may be receiving public benefits, such as Medicaid or Supplemental Security Income (“SSI”), that have strict financial criteria. For instance, individuals with resources in excess of $2,000 do not qualify for SSI. If a disabled individual receiving SSI benefits receives an inheritance that puts their total assets over $2,000, he/she can lose his/her SSI benefits!

Consider the following scenario:

Because of her disability, Mary must see medical specialists on a monthly basis and requires regular assistance with activities of daily living such as walking, bathing and dressing. Mary has been receiving SSI benefits for more than ten years. Each month, Mary receives an SSI payment in the amount of $733.00 (the maximum Federal amount for an eligible individual). Since she lives in one of the 32 states that automatically provides Medicaid eligibility to those who qualify for SSI, Mary also receives Medicaid benefits that cover her health care needs since Mary does not have private health insurance. As a condition of her SSI and Medicaid benefits, Mary may not have assets in excess of $2,000.

Mary inherits $10,000 from her brother’s estate. While Mary is touched to learn of the gift from her brother, she is now faced with losing her SSI and Medicaid benefits until she spends the money back down to under $2,000. While the $10,000 inheritance will cover her monthly expenses in the absence of her SSI payment, it is not nearly enough to cover her medical expenses that will almost certainly arise during the time that she is ineligible for Medicaid. To add insult to injury, she will have to spend hours speaking with a Social Security Administration case worker and her state Medicaid case worker (or perhaps engage the services of a professional to do so on her behalf), in order to get her SSI and Medicaid benefits back once she is eligible for these benefits again.

If you know that one of your beneficiaries is receiving public benefits or think that he/she might be disabled, it is important to inform your estate planning attorney so that your estate plan can include provisions to accomplish the following:

(1) Allow the disabled individual to benefit from your estate; and

(2) Preserve your beneficiary’s critically-needed benefits.

The proper planning technique may involve a trust in your last will and testament that carefully directs your Trustee as to how the assets should be distributed to your disabled beneficiary so as to supplement the public benefits that he/she is receiving, but not disqualify him/her from qualifying for the benefits.

It also might be a good idea to discuss your intentions with the proposed disabled beneficiary, as he/she might already have a trust set up for this purpose. If this is the case, you should consider naming the disabled beneficiary’s trust as a beneficiary of your estate. The proper planning strategy depends on several factors, including the age of the beneficiary, nature of his/her disability and the type of public benefits he/she is receiving.

If you are the recipient of public benefits and are about to receive an inheritance that will jeopardize your benefits, it is also possible to engage in strategic planning that will minimize the impact of the inheritance on your benefits while still allowing you to enjoy the benefit of most, if not all of the inheritance.

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About Pamela Quattrone

Pamela A. Quattrone, Esq., MBA is an Associate attorney at the Law Offices of Nancy M. Rice. Pamela dedicates her practice to estate, tax and long-term care planning, estate administration, guardianship, and litigation related to each of these areas. She also works with individuals and their families to address asset-preservation issues and long-term care concerns.​Rice Elder Law.

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