How to Give Without Jeopardizing Government Benefits

0:00A grandmother wants to divide her wealth equally among her grandchildren, simple, right? But one of those grandchildren has Down syndrome and a well-intentioned gift could accidentally jeopardize whose eligibility for government benefits. Today, we break down what means tested really means while a special needs planning matters and how families can give generously without creating unintended consequences. Smart giving starts with understanding the rules. Welcome to the Death Readiness Podcast. This is not your dad's estate planning podcast. I'm Jill Mastriani, estate planning attorney, death readiness guide, and you're a translator for wills, trust, probate, and the conversation's most families avoid. If you've been wondering things like, can a trust protect what I lead to my children? What happens if I give someone power of attorney over me? And how can I help my parents while respecting their independence? You're in the right place. My mother was a teacher, so she was home with us during the summers.

1:01She kept us busy walking, biking, swimming, and taking care of our four-legged family members. We live near the Great South Bay among island. And one summer day, we were walking our two dogs, Velvet and Sandy, home from the beach when another dog joined us. Velvet was a black lab, and this dog looked almost exactly like her. If you've ever tried to walk leashed dogs while a loose dog tags along, you know the chaos and lives pulling and circling. This dog followed us all the way home. We somehow got ourselves inside while keeping the mystery dog outside. And it's spent most of the day hanging out in our yard. Later that evening, my dad came home from work, swung open the back door with total confidence and announced, look who I found. He thought that we had lost Velvet in that in our summer distraction. We just hadn't noticed she was missing. Except we had it lost her. My dad had proudly and so very smugly

2:03brought the exact dog we'd been avoiding all day right into the house. I grabbed Sandy, our smaller older dog, and ran into the bedroom. Behind that closed door, the noise sounded like a cartoon tornado as Velvet and her lookalike tore through the house. Though my dad opened that door, full speed ahead, completely confident in a situation he actually didn't understand, is how a lot of people approach a state planning. In our case, the consequences were 15 minutes of chaos and a great family story. But when it comes to a state planning, especially when a family includes someone with special needs, misplace confidence can lead to much more significant consequences. Today's Tuesday triage question comes from my grandmother who's doing exactly what we hope people do. Slowing down, asking questions, and making sure her gifts actually have the impact she intends. Jay is a grandmother in Tennessee who wants to divide her required minimum distributions

3:06equally among her grandchildren. One of Jay's grandchildren has Down syndrome. How does Jay give with love and fairness without accidentally jeopardizing her grandchild's eligibility for government benefits? We'll get to the answer. But first, let's make sure we're all in the same page about what a required minimum distribution is. Jay turned 73 in December 2025. That matters because age 73 is when federal law requires people to start taking required minimum distributions or RMDs from certain retirement accounts. For Jay, that means she has until April 1, 2026 to take her first RMD from her IRA. That date is called her required beginning date. A required minimum distribution or RMD is the minimum amount the IRS requires you to withdraw each year, beginning with that required beginning

4:07date. The idea is simple. These accounts grew with tax advantages and eventually the government wants you to start paying taxes on that money. So instead of letting the account grow forever, you're required to withdraw at least a minimum amount each year and pay taxes on what you take out. The amount Jay must withdraw this year is based on her IRA balance as of December 31, 2025. There is a little more nuance here than we need to get into for a Tuesday, triage episode. But I do want to highlight one important detail before we move forward. Jay has a traditional IRA, not a Roth IRA. That distinction matters because required minimum distribution rules don't apply to Roth IRAs while the original owner is alive. Those rules apply to beneficiaries after the owner's death. So federal law currently sets age 73 as the starting age for required minimum distributions.

5:11And if you're listening and thinking, wait, I thought I was 72 or maybe 70 and a half. You're not wrong. Those were the prior ages. The law changed starting with the 2023 tax year. And now the age is 73. So what exactly does Jay, who turned 73 in December, 2025, need to do by April 1, 2026? She takes the value of her IRA as of December 31, 2025 and divides that number by a life expectancy factor provided by the IRS. We obviously can't know anyone's real life expectancy. So the IRS gives us a table to use. Based on that table, Jay's life expectancy is 26 and a half years. Let's use simple numbers for an example. If Jay's IRA balance was $106,000 on December 31, 2025, she divides that by 26.5.

6:14That gives us a required minimum distribution in RMD of $4,000. That means Jay must withdraw $4,000 from her IRA by April 1, 2026. And she'll pay income tax on that $4,000 amount. Now we have some context for where Jay's gift is coming from. For purposes of this example, let's use the $4,000 RMD and assume Jay has four grandchildren. The math is simple. If she wants to divide it equally, each grandchild would receive $1,000. Jay would pay tax on that $4,000 RMD. So in reality, she wouldn't have the full $1,000 to give to each grandchild, but you get the point. Before Jay writes any checks though, I'd recommend one important step. A conversation with her children, the parents of the grandchildren, she wants to give these gifts to. If any of the grandchildren are minors, do they already have a count set up to receive gifts?

7:17And just as important, are the parents comfortable with their child receiving that amount of money? And even though Jay is coming from a place of generosity, it's worth pausing to think about the bigger family dynamics. If any of the grandchildren are adults, is money a sensitive topic? Are there spending habits or financial realities Jay might not see that the parents are aware of? Could a well-intentioned gift accidentally create tension between parents and adult children or between Jay and her adult grandchildren? It's also helpful for Jay to check in with herself. What does she hope the gift will mean? How does she expect gratitude to be shown? And how might she feel if a grandchild spends the money differently than she imagined? Maybe on a vacation instead of saving it for the future? Gifts are generous, but money almost always comes with expectations. Sometimes spoken, sometimes unspoken.

8:18And the people receiving the gift may not experience those expectations, the same way the giver does. So before moving forward, I'd encourage Jay to be honest with herself about what she hopes will happen and what might feel disappointing if it doesn't. If there's hesitation about giving cash directly, families can usually find a mill of ground. Maybe Jay pays for a summer camp or another meaningful experience for the grandchildren instead. And if everyone is comfortable with the grandchildren receiving money directly, then the next step is getting into the logistics of how those gifts should actually be made. If a minor already has an account set up, it's usually something like a 529 account or an Atma or Agma account. A 529 account is a tax advantage education savings account. The money can grow over time and if used for qualified education expenses, comes out tax-free.

9:19Atma stands for Uniform Transverse to Miners Act and Agma stands for Uniform Gifts to Miners Act. Atma accounts are more flexible and can hold almost any type of asset like, for example, real estate or fine art. Agma accounts are limited to financial assets like stocks and bonds. Both types of accounts are custodial accounts where an adult manages money on behalf of a child until the child reaches the age of majority, usually 18 or 21, depending on the state. The big picture difference is this, a 529 plan is money set aside specifically for education and controlled by an adult. While upma and Agma accounts are legally the child's money, the adult is simply managing it until the child gets direct access to it at age 18 or 21. Once Jay and the parents decide where the gift should go, the next question is practical. How should the check actually be written?

10:21Let me give you a real example. Most of my accounts are with RW beard. If my dad wanted to make a gift to my daughter, I'd ask him to make the check payable to RW beard FBO, which means for the benefit of, April, Mastriani, and include the account number in the memo line. He could then hand me the check and I'd make sure it gets deposited correctly. And I suspect Jay may already be a step ahead here. I imagine she's had some of these early conversations and that's probably why she's asking today's question. One of Jay's grandchildren has Down syndrome. For purposes of this episode, we'll call him Paul. Jay wants her gift to help Paul, not accidentally create problems for him. Whether Paul is a minor or an adult, protecting Paul's eligibility for certain government benefits is really important. Many people with disabilities rely on means tested benefits like supplemental security income or SSI and Medicaid.

11:26These programs often provide access to medical care support services and long-term stability that private money alone can't replace. Means tested simply means the government looks at someone's income and assets to decide whether they qualify. If an individual's resource or income go above certain limits, even temporarily, benefits can be reduced or lost. So if Paul were to receive money outright, even from a loving grandparent, that gift can unintentionally push him over those limits. Jay wants to be generous while protecting the foundation that allows Paul to be supported over the long term. And this is exactly where real legal planning matters. I'm now practicing law again and offering Tennessee estate planning services, helping families put the right structures in place before good intentions turn into unintended problems. If you're in Tennessee and this sounds like your family, you can learn more about working with me at deathreadiness.com.

12:29Instead of giving money directly to someone with special needs, families often use tools like a properly designed third-party special needs trust or an able account. Both are ways to give generously while protecting an individual's eligibility for government benefits. A third-party special needs trust is funded with money that belongs to someone other than the person with the disability. Parents, grandparents, or other family members. When those assets stay inside a properly drafted trust, they don't count against eligibility for means-tested benefits, like SSI Medicaid. An able account which can be opened online through your state's Able plan works a little differently and it doesn't require a lawyer to set up. Able stands for achieving a better life experience. Think of it as a special savings account designed for individuals with disabilities. The individual, along with family members and friends

13:30can contribute to it. Funds in enable account are also exempt for government benefit eligibility purposes up to certain limits. There are contribution limits that you need to pay attention to. For example, balances over $100,000 can affect eligibility for benefits. And for 2026, the total contribution limit is $20,000 coming from all sources. So if Jay decides to contribute to enable account for Paul, she'll want to coordinate closely with his parents to make sure contributions stay within those limits. Ultimately, Jay's next step is to get clear instructions from Paul's parents about the best way to make the gift, whether it's to enable account or to a third-party special needs trust. And what if Paul's parents haven't set up an able account or a third-party special needs trust yet? What does Jay do then? In that situation, I would encourage Jay to start with a simple conversation.

14:32She can explain that she'd love to divide her required minimum distribution equally among her grandchildren and ask whether Paul's parents would be comfortable receiving the gift directly to use for Paul's benefit until a more formal structure is in place. Of course, Jay needs to feel comfortable without arrangement, too. And really, this isn't unique to Paul. The same issue can come up with any grandchild, especially minors. Maybe the parents of Jay's other grandchildren haven't set up 529 plans or custodial accounts yet. Parenting is busy. Sometimes we're just trying to get lunches packed and manage the next meltdown and setting up savings vehicles falls to the bottom of the list. And sometimes there simply isn't extra money sitting around, so there hasn't been a reason to open a special account yet. Jay could set up a 529 account or a custodial account herself for the benefit of a grandchild other than Paul,

15:32but again, I would only recommend doing that after a conversation with the grandchild's parents. Every family, every grandparent, every parent, every grandchild is different. Values around money and gratitude vary, and they often change with life experience. I know for me, I didn't fully appreciate my parents until I became a parent myself. I remember sitting in the backseat of the car as a kid repeating, mom, mom, mom, while she stared blankly ahead, completely zoned out taking a tiny mental break from motherhood while still being right there with us. Jay's desire to give to her grandchildren is incredibly generous. The only caution I would offer is this. Communication matters every step of the way, not just with her children and grandchildren, but with herself. What does she hope this gift will mean? How does she hope it will be used? And how might she feel if things don't unfold exactly

16:32the way she imagined? If she senses that mismatched expectations could create tension, it may be worth taking money off the table, at least for now. There are so many other meaningful ways to use that generosity, supporting a cause she loves, visiting her grandchildren more often, or even doing something for herself that she's been putting off because it felt too indulgent. Jay, thank you for asking this question. The fact that you're thinking ahead and taking the time to learn before you act is exactly what thoughtful, loving, planning looks like. I'm now actively practicing log in and offering estate planning services for clients in Tennessee. So if you're listening and thinking, I need help getting my own plan in place. You can learn more about working with me at deathreadiness.com. That's deathreadiness.com. Thanks for joining me today. This is deathreadiness, real, messy, and yours to own.

17:34I'm Jill Masteryani, and I'm here to help you sort through it, especially when you don't know where to start. Hi, I'm April Jill's daughter. Thanks for listening to the deathreadiness podcast. While my mom is in a truney, she's not your attorney. The deathreadiness podcast is for educational and entertainment purposes only. It does not provide legal advice. For legal guidance, tell us your unique situation, consult the lessons attorney in North State. To learn more about the services my mom offers, visit deathreadiness.com.