Ask the Expert: Son's direct inheritance

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Lynn Brenner

Lynn Brenner Lynn Brenner

Brenner answers questions about all aspects of family finance.

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I'm 80 years old and want to leave my adult kids equal inheritances when I pass on. One child has received Medicaid and SSI benefits for 10 years. He doesn't want me to do a Supplemental Needs trust for him -- doesn't want to ask any executor for money all the time. If he inherits money directly, will he lose his benefits and have to pay back all previous benefits he has received?

 

Medicaid and Supplemental Security Income, or SSI, are government benefits based on financial need. A direct inheritance of more than $2,000 would disqualify your son for current benefits, but he wouldn't have to repay past benefits, says Sharon Kovacs Gruer, a Great Neck elder-law attorney.

As you clearly understand, his Medicaid and SSI eligibility isn't affected if you leave his inheritance to a Supplemental Needs Trust for his benefit, which can only be used to supplement government assistance. Ideally, a good trustee should make it easy for your son to spend the trust funds on a wish list that Medicaid and SSI don't cover. If there's no likely trustee available, weigh the consequences of a direct inheritance. Gruer says factors to consider before making a decision include the cost of the government-provided services he currently receives if he must pay for them himself, and the size of his inheritance and his ability to manage it.

If he inherits directly and later regrets it, he can requalify for governmental benefits if a parent, grandparent, guardian or court establishes a "payback" supplemental needs trust for him while he's younger than 65. He can put his inheritance into that trust. Any money left in the trust at his death must repay Medicaid for his benefits.

The bottom line A direct inheritance can disqualify your heir for government assistance.

Websites with more information 1.usa.gov/10OpqT6 and bit.ly/ZbO5AJ

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