Beyond Disinheritance: The Transformative Power of Special Needs Trusts
Choosing to disinherit someone can be tough, even when it seems like the right thing to do. But in the complex world of estate planning, we've seen some clients make surprising choices. By intentionally leaving a family member out of their will or trust, they're actually able to provide more meaningful support for that person. So, even if it looks like they're getting nothing on paper, they're actually gaining something much more valuable.
The negative reasons for disinheritance often revolve around 'black sheep' family members. There might be longstanding family strife, legal troubles, or even substance abuse issues that cause a family to exclude them from the will or trust. In these scenarios, the sudden influx of money could worsen their situation.
Read more: How to Pick a Trustee for Your Trust
On the neutral side, there are cases where parents opt to disinherit their children from their will or trust. This decision is not made out of ill-will but pragmatism. Their children might be thriving financially, and the parents would prefer to assist the next generation - their grandchildren. Alternatively, the parents might choose to support a charity or a cause they are passionate about.
Surprisingly, some children are disinherited for their benefit. This usually applies to children with disabilities or special needs who are receiving means-tested government assistance. If they suddenly inherit a significant sum, it might disqualify them from this support.
This is where the Special Needs Trust (SNT) plays a crucial role. Instead of the child receiving the inheritance directly, it's channeled into the SNT. A third-party manager oversees the trust, ensuring the funds are used for the beneficiary's care without affecting their eligibility for government assistance.
Special Needs Trusts are not just limited to children with disabilities. They can be used to help any individual who might be at risk from a sudden influx of cash, such as those struggling with substance abuse. The trust allows for the maintenance of their lifestyle without the potential for misuse of funds.
Disinheritance, therefore, isn't always a punitive measure. It can be an act of protection or forward-thinking financial planning.
Read more: Estate Planning with a Special Needs Child | The Special Needs Trust
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