Most people recognize that having an estate plan is critical for all adults, but some may not realize that Social Security Disability Insurance (SSDI) can impact how estate planning is handled. The way that the estate plan is affected depends on whether the SSDI benefits are being received by the person writing the estate plan or the person who is receiving the inheritance.
SSDI is a federal benefit that depends on a person’s work history and disability status. Unlike needs-based programs, SSDI isn’t affected by inheritances or most assets. Understanding what considerations are present may be beneficial for anyone embarking on the estate planning process.
When the estate plan creator is on SSDI
One of the important considerations for a person who is receiving SSDI and wants to write out their estate plan is to consider how incapacity may affect them. Having plans in place for someone to make medical and financial decisions for them is crucial. These responsibilities are handled through powers of attorney designations that give someone the ability to make specific decisions. Ensuring the person who has the financial power of attorney will make decisions with consideration of asset preservation is beneficial.
When the beneficiary receives SSDI
While SSDI isn’t a needs-based program, it may still be beneficial to consider other areas that an inheritance may impact. For example, Medicaid, which may be needed to afford medical care, can be impacted by assets and inheritances. This could mean that a special needs trust needs to be established for the inheritance. These trusts have special conditions that allow the assets held in them to not be counted as assets, but the drawback is that the beneficiary would never directly receive the inheritance.
Everyone’s circumstances are different, so it’s critical that anyone facing these circumstances takes the time to learn how available estate planning options may impact them. Working with someone who can assist with this can be valuable.
