I frequently run across clients whose special needs kids have custodial accounts in their names. The parent, a grandparent, or another individual, who had great intentions, thought the money would help the child later in life. In some cases, the child may have developed the special needs after the account was set up.
Although the person who set up the account had great intentions, this is almost always a problem. When a special needs child applies for Medicaid and SSI, there are strict requirements they must meet as far as assets. Generally, they cannot have more than $2,000 in countable assets. Once a person turns 18, typically he or she legally has access to any money in a custodial account, and therefore it is considered an asset of the individual for whom the account was set up. Therefore, if the money in the account causes the individual to have over $2,000 in countable assets, the individual will lose eligibility for SSI and Medicaid until the money is spent.
If you wish to give money to a special needs child, there are better ways to do it than a custodial account. It may be wise to talk with a special needs estate planning attorney to discuss your options, such as a special needs trust. If you are in the Marietta area, including Woodstock, Acworth, Kennesaw, Canton, Jasper, and the surrounding areas, call Sarah White at 678-453-6490. I frequently work with families who have children with special needs, and I am happy to discuss your case with you. Call today to learn more.
Are you a trustee for a special needs trust or considering becoming a trustee? Click here and fill out the online form and the Special Needs Alliance will send you a free handbook with information for trustees of special needs trusts.
This article discusses the challenges facing working moms with special needs children.
This is an excellent article giving an overview of basic special needs planning, including the importance of special needs trusts, establishing a guardianship for children over 18, and creating a letter of intent.