Melanie B. Holliman, Estate Planning & Special Needs Attorney, and Executive Director of Alabama Family Trust discusses things to consider regarding inheritance and siblings.
Published: August 31, 2018
By: Melanie B. Holliman
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Now that’s a loaded question, and the answer is, “it depends” . . . on your sibling’s situation.
Most often, clients leave assets for a sibling in three situations: (1) the sibling is aging and has limited assets to pay for long-term care; (2) the sibling is disabled, and the client wants to provide funds help care for the sibling; and (3) the sibling has historically been a poor money manager, has few assets, and the client is worried about the sibling’s well-being long term.
In these cases, the client has the sibling’s well-being in mind. However, leaving an inheritance directly for the sibling will likely be a poor decision and not end the way the client intended.
Aging senior sibling – An inheritance will now be part of a spend-down program if the sibling needs Medicaid. In fact, if the sibling is already receiving Medicaid benefits, the inheritance will cause the sibling to lose the Medicaid benefits until the inheritance has been spent. For example, Jane is in the nursing home, and Medicaid pays the monthly nursing home bill. Sarah leaves Jane $50,000 in her Will. This money will cause Jane to lose her Medicaid benefits until those funds have been spent on her nursing home care. So, in the end, Sarah’s gift was misguided. If Sarah had put the money in a special needs trust account for Jane, the money could have been used for things Jane wanted and would not have disqualified her from Medicaid.
Disabled sibling – The same is true if a disabled sibling is receiving SSI and Medicaid benefits. In both instances, a client should set up a special needs trust for the benefit of the sibling. With this strategy, the client has peace of mind that the sibling’s needs will be met without losing important government benefits.
Poor money manager sibling – Leaving money to this sibling is like throwing the money away. The assets will be spent quickly without the sibling having anything to show. In this case, a client can set up a trust that governs how much money the sibling receives putting some control over the assets. In fact, it may be best for the trustee to pay certain bills directly each month for the sibling so there is no chance the sibling wastes the money on unnecessary items.
If you want to leave your sibling an inheritance the best way possible, make sure you discuss the entire family situation with your attorney.
Melanie B. Holliman – Executive Director of Alabama Family Trust and Law Partner at Bradford & Holliman
This article is for educational purposes and is not intended for specific legal advice.