Many people look at estate planning as a one-sided affair that revolves around the decisions that are made by the person leaving the inheritances. In fact, this is half of the equation, because you should also consider the recipients when you are developing your plan.
There are different asset transfer methods that can be utilized, and the right choice will depend on the circumstances. This is profoundly demonstrated by the estate planning approach that should be taken if you are leaving an inheritance to someone with a disability.
Need-Based Government Benefits
Most Americans get health insurance through their employers, but a significant percentage of people with disabilities are not in a position to work. Clearly, they need coverage, and health insurance is very expensive.
Fortunately, a safety net exists in the form of the Medicaid program, and people with disabilities can also qualify for Supplemental Security Income (SSI). There is a $2000 limit on countable assets, so a change in financial status cause a loss of eligibility.
This is something to think about if you have a person with a disability on your inheritance list.
Supplemental Needs Trust
The widely embraced solution for this type of situation is the utilization of a supplemental needs trust.
When you establish the trust, you provide the funding and you name a trustee to act as the administrator. There are professional fiduciaries that provide trustee services, but any competent adult that is willing to assume the role can technically act as the trustee.
In 2021, the maximum monthly SSI benefit is $794, and that is not going to go very far. Plus, Medicaid does not cover every medical, dental, and therapeutic procedure that a beneficiary may want or need.
Under the rules of the benefit programs, the trustee would be able to use the assets to satisfy the unmet needs of the disabled individual. These are some of the expenses that can be covered by the trustee without breaking any rules:
- Tuition and training
- Uncovered medical and dental expenses
- Place of residence
- Motor vehicle
- Vacations
- Electronic equipment and appliances
- Recreation
- Companionship
This is just a partial list of the many different goods and services that can be provided.
Medicaid Estate Recovery
In many cases, there will be resources left in a supplemental needs trust after the death of the beneficiary. Medicaid is required to seek reimbursement from the estate of benefit recipients after they pass away.
Because Medicaid is a need-based program, there is usually nothing there to take, but the situation is different when a supplemental needs trust has been established. If you fund the trust with your resources as a third party, the assets would be protected during the recovery phase.
When you create the trust, you would name a successor beneficiary, and they would assume ownership of the resources.
Sometimes a person with a disability will receive a windfall due to a personal injury settlement or judgment or from some other source. Under these circumstances, the assets can be used to establish a first party or self-settled supplemental needs trust.
The trustee would have the same ability to make the individual more comfortable in many different ways, but the assets would be available to Medicaid after the death of the grantor/beneficiary.
Schedule a Consultation Today!
Our doors are open if you are ready to work with a Hilton Head, South Carolina estate planning attorney to put a plan in place. You can send us a message to request a consultation appointment, and we can be reached by phone at 843-815-8580.
Hunter is a member of the South Carolina Bar Association, the Beaufort County Bar Association, and has served on charitable and advisory boards in the Bluffton/Hilton Head area.
Hunter graduated from Hilton Head High School. He then earned his Bachelor of Science Degree in Economics from Clemson University, in Clemson, South Carolina.
Hunter graduated Cum Laude from Regent University School of Law in Virginia Beach, Virginia, having earned a Juris Doctor Degree. He also wrote his doctorial thesis on Estate Planning Dynasty Trusts.
Hunter has called Beaufort County home for since 1984, where he lives with his wife and two children.In his spare time he dabbles in automobiles, reading history, hunting and fishing.
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