How Do You Leave a Bequest to a Medicaid Beneficiary With a Disability?
People with disabilities obviously need health insurance, and many of these folks cannot work, so they cannot get coverage through their employers. Fortunately, individuals that are in this position that do not have significant financial resources can qualify for Medicaid.
They can also receive Supplemental Security Income (SSI), which is a modest source of ongoing income for people with disabilities that do not have much earning power.
These benefits are important, and eligibility is not necessarily permanent. An improvement in financial status can cause a forfeiture of benefits until the assets have been spent.
This dynamic presents an inheritance planning challenge, but there is a solution that can be implemented if you work with our firm to develop your plan.
Supplemental Needs Trust
You could establish and fund a supplemental needs or special needs trust to provide an inheritance to someone with a disability that is relying on these benefits.
When you are drawing up the trust agreement, you name a trustee to act as the administrator. Any adult that is willing to assume the role can technically act as the trustee, and there is another option that is preferable in some cases.
Trust companies and the trust departments of banks provide trustee services. There is a fee involved, but this can be the right choice in some cases.
The beneficiary of the trust would not have direct access to the assets, but the trustee would be able to use the resources to make purchases that improve the beneficiary’s quality of life.
These would include vacations with or without a companion, computers and other electronics, training and tuition, a specially equipped van, medical and dental procedures that are not covered by Medicaid, and a host of other goods and services.
In fact, the trustee could actually purchase a home for the beneficiary to live in, and benefit eligibility would not be lost.
Medicaid Estate Recovery
The Medicaid program is required to seek reimbursement from the estates of beneficiaries after they pass away. Since you cannot qualify for Medicaid if you have more than $2000 in countable assets, there is usually nothing for them to take during the recovery phase.
When a special needs trust has been established, the dynamic is different, because there may be assets left in the trust after the death of the beneficiary.
If you use your funds to establish a supplemental needs trust for the benefit of someone else, it would be a third party trust. Medicaid would not be able to touch the remainder that is left in the trust after the death of the beneficiary.
When you establish the trust, you would name a successor trustee to assume the role after the death of the initial beneficiary, and they would inherit the assets.
If a person with a disability that is relying on these benefits comes into money for some reason, the assets can be used to fund a supplemental needs trust. This would be a first party or self-settled trust.
In these situations, Medicaid would be able to go after the assets that remain in the trust after the beneficiary’s death. This is why you would not want to leave a direct inheritance to someone with a disability with the idea that they could use the assets to establish a trust on their own.
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One of them is our estate planning worksheet, and you will gain a more thorough understanding of the process if you take the time to go through it. To get your copy, visit our worksheet access page and follow the simple instructions.
Need Help Now?
If you already know that you should work with a Cincinnati estate planning lawyer to put a plan in place, we are here to help. You can send us a message to request a consultation appointment, and we can be reached by phone at 513-721-1513.