Ask the Expert: Can an inheritance affect eligibility for public benefits?

Question: "My child's father recently passed away and named me as the beneficiary of his estate. There is no specific instruction or special needs trust established. Can this affect my child's eligibility for public benefits?"

Answer: Yes, it can. First, I am going to assume that your child is the actual beneficiary and that you have been charged with handling the funds on his or her behalf. Certain public benefits are means tested. The government looks to the value of the child's assets in determining whether he or she qualifies for certain public benefits, namely Supplemental Security Income (SSI), Medi-Cal, In Home Support Services (IHSS) and HUD housing.

To qualify for these benefits, the child must have under $2,000 in non-exempt assets. Exempt assets are generally a home that the child lives in and an automobile. Exempt assets are not counted as assets in determining eligibility. Other assets are countable when determining whether the child qualifies for these benefits. If the child's father left more than $2,000 for your child, then he or she will lose public benefits.

One way of handling this is to spend down the assets. Whatever you spend the funds on, it must be for the benefit of your child. If you spend them down in the month that the funds are received, this will result in your child losing benefits for that month only.

The other way in which to handle this is to establish a first party special needs trust with the funds. A special needs trust is a device set up to provide for the special needs of a disabled person so that the disabled person with assets over $2,000 can still qualify for means tested public benefits. The assets in the special needs trust must be used exclusively for the benefit of the disabled child, yet those funds are not counted as assets when determining eligibility for means tested public benefits.

Rebecca F. Weisman, Esq.
Fleishman & Weisman, PC
79 Devine St, Ste 200
San Jose, CA 95110
408-288-2799 (fax)

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