By Barry Zimmer on July 22nd, 2021 in Asset Protection, Estate Planning, Estate Planning, Estate Planninng, Medicaid, Medicare Recipients, Special Needs, Special Needs Planning
Medicaid is required to seek reimbursement from the estates of people that were enrolled in the program while they were living. Since it is a need-based program, you cannot qualify if you have more than $2000 in countable assets.
Many seniors seek Medicaid eligibility late in their lives because this program will pay for long-term care. Medicare does not pay for the custodial care that nursing facilities provide.
A significant percentage of individuals with special needs also rely on Medicaid as a source of much-needed health insurance.
Since you cannot qualify for Medicaid if you have significant resources, there is usually nothing for them to take during the Medicaid estate recovery phase. However, the situation is different for many people with disabilities.
Supplemental Needs Trust
If you want to include a Medicaid beneficiary in your estate plan, you have to be concerned about the impact an inheritance may have on eligibility. A direct, lump sum would catapult the individual in question into a different financial position, and eligibility could be lost.
Under these circumstances, you can assist your loved one and preserve the benefits if you fund a supplemental needs trust. This type of trust is alternately called a supplemental needs trust.
You can technically act as the trustee, but if you are using the trust for estate planning purposes, you would name someone else to assume the role. Any competent adult that is willing to take on the responsibility can act as the trustee, but there is another option.
Trust companies and the trust departments of banks offer trustee services. There is a fee involved, but in some cases, a professional fiduciary is the right choice.
The trustee would be able to make many different types of purchases that benefit the person with a disability. If everything is done correctly, benefit eligibility would not be negatively impacted.
Medicaid Estate Recovery
Now that we have set the stage, we can get to the point of this post. When the funding for the trust is coming from someone other than the beneficiary, it is a third-party trust.
Let’s say that you establish this type of trust for your brother. In the trust declaration, you could name your son as the successor beneficiary. After your brother’s death, your son would inherit the assets, and Medicaid would not be able to touch them.
Sometimes a person with a disability that is already a Medicaid beneficiary will come into money. They may receive a personal injury settlement or judgment, insurance policy proceeds, or an inheritance from someone that does not understand the rules.
The funds could be used to establish a supplemental needs trust. All of the details would be the same with regard to the trustee’s ability to use the assets to make the beneficiary more comfortable.
However, there is one major difference. After the death of the beneficiary, Medicaid would be able to attach the assets that remain in the trust.
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