Should you give money to an adult child who has a disability?

If you are a parent, you want your child to have a fulfilling and happy life. Of course, if your adult son or daughter has a disability, he or she may be virtually incapable of holding down a job. This may lead to a lifetime’s worth of poverty or financial struggles, sadly.

According to reporting from CNBC, half of all parents in the U.S. financially support their adult children. While gifting money to your son or daughter may seem like a generous thing to do, you might inadvertently make your child ineligible for Supplemental Security Income, Medicaid or other public benefits.

Means-tested public benefits

As you may know, federal and state governments do not often hand out money to anyone who wants it. Instead, government programs consider the income and assets of those who need public assistance. The income thresholds for many of these programs are quite low, typically requiring recipients to have virtually no income and very few assets.

Your generous gift

If you gift money to your adult child, you might unintentionally push him or her over the income threshold for the government benefits he or she receives. This means your son or daughter can lose the money and other benefits he or she relies on to make ends meet every single month.

An alternative

There is an alternative you may want to consider. If you set up a special needs trust, you set aside money for your child’s benefit without actually gifting it to him or her. This means your child can use funds from the trust on certain expenses without losing public assistance.

Ultimately, to be sure your child continues to be eligible for public help, you should talk to an estate planning lawyer before making any gifts.