There are different ways to provide for loved ones that are on your inheritance list, and a suitable method for one person may not be appropriate for the next. This definitely enters the picture when you are going to be leaving an inheritance for the benefit of someone with a disability.
Most insured Americans that are not eligible for Medicare receive their coverage through their employers. A significant percentage of people with disabilities are not in a position to hold jobs, so this avenue is not available to them.
Obviously, health insurance is going to be particularly important for these folks, and there is a solution in the form of Medicaid coverage. This jointly administered federal/state government health insurance program is available to people with limited financial resources.
People with disabilities that qualify for Medicaid can also receive Supplemental Security Income (SSI), which is self-explanatory. The maximum SSI benefit in 2022 is just $841 a month, but every little bit helps.
If you leave an inheritance to someone that is relying on these benefits, they would be in a different financial position. This can result in the loss a benefit eligibility, but there is a solution that you will learn about if you discuss the matter with a trust lawyer.
Supplemental Needs Trust
A supplemental needs trust is an estate planning tool that can be ideal for people with disabilities that are relying on Medicaid and Supplemental Security Income. To implement this strategy, you fund the trust, and you name a trustee to act as the administrator.
Any adult that is willing to take on the role can technically act as the trustee, and there is another option. You could engage a professional fiduciary to manage the trust. Trust companies, the trust departments of banks, and other professionals provide trustee services.
Yes, there is an expense involved, but you will be certain that the trust is managed properly if you utilize a professional. In addition to the money management, the trustee will understand the implications of eligibility for Medicaid and SSI.
The beneficiary would not be able to directly access assets that are contained in the trust, and they would not directly own the assets. As a result, the resources in the trust would not count against them from a benefit eligibility perspective.
Under the rules of the programs, the trustee would be able to provide goods and services that make the beneficiary more comfortable in many different ways. Direct payments for food and shelter are not permitted, but everything else is on the table.
The trustee can use assets in the trust to provide vacations, medical and dental care that is not covered by Medicaid, tuition and training, a specially equipped vehicle, electronics, musical instruments, and on and on.
Government benefit eligibility would not be lost, and assets that remain in the trust after the death of the beneficiary would be inherited by a successor that you name in the trust declaration.
Medicaid is required to seek reimbursement from the estates of deceased beneficiaries. Since the beneficiary of a supplemental needs trust that was funded by a third-party never actually owned the assets, they would not be part of their estate. This is why the successor beneficiary would assume ownership of the remainder with no interference from Medicaid.
Assets that are the property of a benefit recipient can be used to establish a self-settled or first party supplemental needs trust. The trustee would have the same latitude to use the assets to improve the beneficiary’s quality of life, but the remaining assets would not be protected from Medicaid estate recovery.
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This is a great opportunity that you should not pass up, and you can obtain more information if you visit this page: Cincinnati estate planning seminars.