Many families lose significant wealth to inheritance traps. The government benefit inheritance trap causes many families to lose wealth. This trap springs when someone dies and improperly leaves wealth to someone on government benefits. More specifically, a family member gives significant wealth directly to a person on needs based governmental benefits and this inheritance causes the benefits to stop.
How is Wealth Lost Through The Government Benefit Inheritance Trap?
Families lose wealth through the Government Benefit Inheritance Trap by inadvertently shutting off benefits. More specifically, someone in the family fails to do proper estate planning and a substantial amount of wealth is given to someone on benefits. If the inheritance is significant enough, it knocks the person off government benefits.
In some situations, a large inheritance helps the beneficiary. The inheritance provides enough wealth that the family member can get off benefits. Further, the person is no longer dependent on government benefits to live.
However, in many situations the inheritance only knocks the person off benefits temporarily. The inheritance lasts only for a year or two as benefits have stopped. Further, the loss of benefits causes the inheritance to be used in place of the benefits. In other words, the inheritance provides little to no benefit to a family member and costs the family significant wealth.
How to Avoid This Inheritance Trap
Families can avoid the government benefit inheritance trap by not giving wealth directly to a person on government benefits. More specifically, families can protect wealth and benefit less fortunate family members with estate planning. A special needs trust helps the person without knocking them off government benefits.
Families can also avoid this trap by not giving inheritance to people on benefits. Further, they can direct their wealth to other family members. They can also request that they help those on benefits.
This option also helps avoid forced sales of inherited real property. More specifically, a person knocked off benefits typically needs liquid assets to survive. As such, they often sell inherited real property to survive. Further, if the person inherits only a part of a house, all beneficiaries must sell the house. Additionally, if this person has capacity issues, the forced sale could require a Guardianship .
More Information on Inheritance Traps
For more information on Texas Inheritance Law and Inheritance Traps, please read this Blog or go to the following webpages: Texas Family Inheritance and Wealth Lawyer and Texas Inheritance Real Estate Lawyer.