People with disabilities often rely on Medicaid as a much needed source of health insurance, and Supplemental Security Income is rather self-explanatory. This is a benefit that provides a steady source of monetary assistance, but these payouts are modest.
Since these benefits are only available to people with very limited resources, an improvement in financial status can potentially cause a loss of eligibility.
Sometimes a benefit recipient will receive a personal injury settlement or judgment. They can also receive an inheritance from someone that that did not think about the potential loss of benefits.
That sounds pretty problematic, but fortunately, there is an effective solution.
First Party or Self-Settled Special Needs Trust
Under these circumstances, the funds could be used to establish a special needs trust. These devices are alternately referred to as supplemental needs trusts.
When the funding is coming from the person that will be benefiting from the trust, it is called a first party or self-settled trust. A trustee would be empowered to administer the trust, and the assets would be used to make the beneficiary more comfortable.
There are many different expenditures that would be approved, including a home, vacations, tuition, and medical and dental treatments not provided by Medicaid, just to name a handful.
As long as everything is done in accordance with the regulations, eligibility for government benefits would not be impacted.
Third Party Special Needs Trusts
It is also possible for someone to establish and fund a supplemental needs trust for the benefit of a person with a disability. Every detail would be the same with regard to the trustee’s ability to use assets in the trust to satisfy the unmet needs of the beneficiary.
Medicaid Estate Recovery
There is one major difference between these two types of supplemental needs trusts. Medicaid is required by law to seek reimbursement from the estates of people that were enrolled in the program while they were living.
When a third-party special needs trust has been established, the grantor of the trust would name a successor beneficiary. After the death of the first beneficiary, the successor would assume the role. Medicaid would not be able to go after the remainder.
Things are different with a first party special needs trust. Since the funds were the property of the beneficiary, the remainder would be in play during Medicaid estate recovery efforts.
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