Legal guidance is invaluable when you are planning your estate because there are many different approaches that can be taken. The best way to transfer assets to one individual may not be appropriate for the next. This dynamic definitely applies to inheritance planning for people with special needs.
Government Benefit Eligibility
Medicaid is a jointly administered federal/state government health insurance program for people with significant financial need. There is an asset limit of just $2000, so an improvement in financial status could cause a loss of eligibility for this essential coverage.
Supplemental Security Income (SSI) is somewhat self-explanatory. People with disabilities that cannot work and earn income can receive a modest monthly income stream through this program.
If you leave a sizable direct inheritance to someone that is depending on these benefits, eligibility could be forfeited.
Supplemental Needs Trust
There is a solution in the form of a supplemental needs trust. To implement this strategy, you fund the trust, and your loved one with a disability would be the beneficiary. You name a trustee to act as the administrator. It can be someone that you know personally, or it can be a professional trustee.
It is important to select a trustee that has a full understanding of the guidelines, because everything must be done correctly to keep the benefits intact.
The trust would be irrevocable, and the beneficiary would not have direct access to the assets. Under the rules of the benefit programs, the trustee can use the assets in the trust to make the beneficiary more comfortable in different ways.
Trust resources can be used to pay for medical procedures that are not covered by Medicaid, vacations, household items, electronics, transportation, and countless other goods and services.
Medicaid Estate Recovery
The Medicaid program is required to seek reimbursement from the estates of benefit recipients. However, if you establish a supplemental needs trust for the benefit of someone else with your funds, it would be a third-party trust.
Medicaid cannot go after any remainder that is left in this type of trust after the death of the beneficiary. You would name a successor beneficiary to assume ownership of remaining funds after the death of the first beneficiary.
It should be noted that a supplemental needs trust can be established for the benefit of a person with special needs with their own funds. This scenario can come into play when someone that was injured in an accident receives a personal injury settlement or judgment.
This is called a first party or self-settled special needs trust. The good news is that everything would be the same with regard to the ability of the trustee to use the resources to assist the grantor/beneficiary. The bad news is that Medicaid would be able to attach the funds that remain in the trust after the death of the individual in question.
Call or Click to Schedule a Consultation!
We would be more than glad to provide assistance if you are interested in creating a supplemental needs trust to enhance the life of a loved one. When you come into the office, all of your questions will be answered, and we will develop the ideal plan if you decide to move forward.
To schedule an appointment, give us a call at 843-815-8580. There is also a contact form on this website that you can use if you would rather send us a message. If you reach out electronically, you can expect to receive a prompt response.
