An inheritance can be a wonderful thing to leave for your children and other people you love. However, especially for larger estates, an inheritance can be as much of a challenge as it is a blessing.
Anyone might struggle with receiving a significant inheritance after the loss of a loved one, but people with special needs may find the changes surrounding a death and then an inheritance particularly challenging.
The three examples below are all compelling reasons to consider creating a special needs trust to make an inheritance safer for someone you love.
A big inheritance has tax and government benefit consequences
It is possible for the people to have to pay taxes on their inheritance if it is worth millions. Even if your estate isn’t large enough for your loved one to have to worry about those taxes, they could have other government issues to worry about.
Receiving a lump sum inheritance might mean that their income and assets increase so significantly that they no longer qualify for government benefits. Losing Supplemental Security Income (SSI) or other crucial benefits might make independent living harder for your loved one.
Large inheritances can push people into bad lifestyle choices
When people receive a large amount of money that they didn’t work hard to earn, they may react poorly. Frivolous spending and an entitled attitude could quickly result after a large inheritance.
Anyone is susceptible to compulsive spending and mistakes with money. Depending on their diagnosis, your loved one with special needs may have more trouble than average with impulse control or independent living skills. They might spend in a few months’ resources that you hoped would help protect them for the rest of their life, leaving them vulnerable and without support.
A sudden windfall can lead to predatory or abusive behavior
Not all of the risks from an inheritance have to do with decisions your loved one might make. Other people may see that inheritance as an opportunity. Unscrupulous people have always tried to grift and scam others out of their resources. Those with special needs who also have access to significant resources are vulnerable to these kinds of predatory individuals. You can protect your loved one without disinheriting them.
A trust that you carefully plan to distribute resources appropriately can enhance someone’s life without endangering the benefits they receive, their daily lifestyle or their mental health. Additionally, the trustee you name for a special needs trust help provide guidance and support to the beneficiary as they adjust to life without you there to help them.