Dear Moneyist,
My only son was diagnosed with a brain tumor, back in 2014. He underwent a 21-hour brain surgery and, thank God, he survived.
Prior to this he was listed in my will to inherit everything, at my passing. His insurance at the time of this nightmare was Connecticut’s Husky D Plan. It’s basically Medicaid.
After speaking with many attorneys, I was advised to remove my son from my will for the time being because, should I pass before restructuring my will, the state of Connecticut could take everything to repay themselves for my son’s medical costs.
How should I structure my will, to be able to leave everything to my only son and protect that inheritance from the state of Connecticut?
I own two homes, several cars, and they are all paid for. I stay out of debt. He is not a candidate for a Special Needs Trust. I’ve looked into that option.
I really want to be able to leave it to him directly.
A Troubled Father
Dear Troubled,
I’m glad your son survived this ordeal, and you’re right to make plans now for his financial future. Connecticut has made adjustments to the law in relation to how and why inheritance can be garnished to pay outstanding medical bills. In this case, it appears this “payback provision” would apply to your medical bills, not those of your son. Some apply to the Husky D Plan, but you would need to talk to a lawyer in your state who deals with these cases.
The good news: There’s a lot you can do now to prepare. I understand that you want to protect the lion’s share of your estate so you don’t have to worry about your son after you’re gone.There are ABLE savings accounts for people with disabilities. You can read more about them here. Insurance programs and Medicaid, although it’s a federal program, vary from state to state. Please get a second or third opinion on the options available to you and your son.
If your son has a chronic condition, don’t rule out a third-part special needs trust. “It is usually possible to structure an estate plan so that the inheritance is left in a way that minimally impacts an heir’s ability to qualify for government assistance,” says Elizabeth Lunn, an estate-planning attorney. “The trusts must be set up very carefully and there are restrictions on how the assets in the trust can be spent, but typically there is no absolute barrier to setting up the trust,” she says.
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Under the circumstances, your inheritance should probably not pass directly to your son through your will. But a third-party special needs trust is not uncommon. “If there are other people who wish to make gifts or bequests to the individual with special needs, such gifts or bequests can be made to the trust, now or in the future without effecting eligibility for programs such as Medicaid or Social Security Insurance for the individual with special needs,” according to DisabilityResource.org.
Alternatively, you could set up an irrevocable trust with some of your assets. Chip Olson, senior vice president of wealth management at People’s United Wealth Management, suggests looking into this. “It’s important that the trust include specific language addressing income and principal distributions,” he says. “The trust should specifically name a trustee other than your son or family members. In such instances, it may be better to name an independent corporate trustee.”
I can’t say what option is best for you and your son. You do have choices, and exploring the best one for your situation will bring both you and your son peace of mind.
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