Question:

My 34-year-old daughter was recently diagnosed with a disabling condition and receives SSDI. I have an irrevocable trust dividing my assets among her and her siblings. How do I amend my trust so that these assets do not affect her receipt of SSDI? And how can another family member leave assets to my daughter?

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Response:

My initial question is whether your daughter is indeed receiving SSDI, Social Security Disability Income, or SSI, Supplemental Security Income. If your daughter is receiving SSDI, then you don’t necessarily need to amend your trust and other family members can leave her assets. SSDI is a form of Social Security that your daughter is entitled to based on her work record and is not affected by her other assets and income. SSI, on the other hand, is a safety-net program for which your daughter may only be eligible if her countable assets are below $2,155 (in 2021).

That said, you may want to shelter property left to your daughter even if she is receiving SSDI because some other benefit programs, including Medicaid and subsidized housing, also have income and asset limits. This can be done by leaving property to her through a special needs trust, which essentially is a trust which gives the trustee total discretion over distributions to your daughter or on her behalf. You can create a special needs trust and let family members know about it so that they include provisions for it in their estate plans.

In terms of your irrevocable trust, my question is, how irrevocable is it? If no one—you as grantor, the trustee, or in some cases a trust protector—has the power to change it, you probably have two options. The first would be go to court for a trust reformation, in effect, getting court permission to amend the trust. The second would be to decant the trust into a new trust, in other words, transferring the trust property to a new trust with the desirable terms, if this is allowable in your state.

With respect to all of this, I would advise consulting with a special needs planning attorney. One resource is the Academy of Special Needs Planners.

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