It is a
grandparentâ€™s right to spoil the grandchildren.
But if your
grandchildren have special needs, giving them large financial gifts may have
grandparents of children with special needs are worried about their
grandchildâ€™s ability to support him or herself and want to help out in any way
they can. But Michael Smith, co-founder of Savannah-based Smith Barid LLC,
which focuses on special needs planning, warns that some financial gifts may
actually hinder oneâ€™s grandchild from getting the support he needs.
with the absolute best of intentions sometimes make it impossible for a child
with special needs to receive the medical care they need,â€ť Smith said. â€śThe key
to really helping your grandchild is to know how special needs planning works
and find out the kind of assistance that you can give without penalizing your
explained that children with special needs often receive financial assistance
or government funded insurance to pay for social workers, therapists, and other
aides that are not available through the school district or through the
parentsâ€™ health insurance. To qualify for these benefits, the children are
limited as to what they can own or earn.
a grandparent were to give the grandchild money or open an account in his or
her name, it could put the grandchildâ€™s benefits at risk.
an account which is not available to the grandchild until she is 18 or 21 can
be damaging,â€ť said Richard Barid, co-founder of Smith Barid LLC. â€śSome
government programs will disregard these accounts while the recipient is a
minor, but as soon as the account is in her name, it can create significant
complications rather than help the grandchild.â€ť
example, Barid said, a Uniform Transfers to Minors Act (UTMA) account becomes the
recipientâ€™s property at 18 or 21 even if the recipient (because of a
disability) is not capable of managing the money. The receipt of that money
could put government benefit programs such as Supplemental Security Income
(SSI) or Medicaid at risk. Medicaid may be the only health insurance for which
a child with special needs can qualify.
money could be transferred to a supplemental/special needs trust account, but
because of court costs and legal fees the beneficiary may end up with quite a
bit less than the intended amount.
said naming the grandchild as a beneficiary on a life insurance policy, an
annuity, a retirement account or savings bonds would have similar consequences.
â€śWhether the bond has the
grandchildâ€™s name, the grandchildâ€™s and parentâ€™s name or the parentâ€™s name
payable on death to the grandchild, at some point it will count against the
grandchildâ€™s eligibility for government assistance,â€ť Smith said. â€śThat will
leave your grandchild with a legal battle he might not be capable of handling.â€ť
Even if a grandparent has
the financial means to make government assistance unnecessary, Barid said
giving money directly to a child with special needs may be ill advised.
â€śWe never know how any
child is going to handle money, but there are other considerations when a child
has special needs,â€ť Barid said. â€śShe might be capable of many things including
going to school or work, but when it comes to money she might spend it
irresponsibly or worst of all might not know if someone is using her for her
the bright side, there are ways for grandparents to give financial gifts to
their grandchildren with special needs without hurting their chances at
government assistance, Smith said.
smaller gifts, probably the best way is to give the money directly to the
parents,â€ť Smith said. â€śAs long as it is deposited into an account in their name
using their social security numbers it wonâ€™t affect the grandchildâ€™s benefits.â€ť
option is to leave the grandchild money in a supplemental/special needs trust.
These trusts are created to supplement the income of a child with special needs
without affecting government benefit program eligibility. The trust can pay for
many life-enhancing benefits including transportation, hobbies, recreation and
can name the trust as a beneficiary of your life insurance policy or retirement
account,â€ť Barid said. â€śThat way you can leave an inheritance to your grandchild
without adversely affecting his benefits.â€ť
if you think your grandchild who has special needs may pursue higher education,
you could open a 529 Account for the grandchild. These accounts are considered
owned by the originator of the account, and not the beneficiary, and,
therefore, would not interfere with the grandchildâ€™s government assistance. If
the child with special needs is not able to go to school, the money could be
used for another grandchild.