Providing for Disabled Heirs

Twelve percent of the U.S. population has a severe mental or physical disability, according to United State Census data. Additionally, two-thirds of caregivers do not have a plan for the future support of the disabled individual they care for. Three tips for planning for the future support of disabled heirs are below:

1. Create a trust that will make mortgage and tax payments on a home for a disabled adult, or create a qualified personal residence trust. A qualified personal residence trust allows the homeowner to continue living in the home for a number of years before ownership is transferred to an heir at a discount.
2. Provide assets to a disabled heir without endangering government benefits by creating a special needs trust. The trust provides long-term care to the beneficiary and is not considered available to the beneficiary for Medicaid purposes.
3. Leave a disabled child’s inheritance in a trust instead of providing an additional inheritance to a sibling with instructions that he or she must care for the disabled child. A caregiver can fund the disabled child’s trust further with a permanent life insurance policy.

See Kelly Greene, Taking Care of Disabled Heirs: When Loved Ones Need Help, Estate Planning Can be Tricky, The Wall Street Journal, Sep. 3, 2011.

Special thanks to Jim Hillhouse (WealthCounsel) for bringing this article to my attention.