It is important to understand that there are many different asset transfer methods that can be used when you are planning your estate. Far too many people think that you name the beneficiaries in a will and that’s the long and short of it, but in fact, this can be a mistake.
Government Benefits for People With Disabilities
You can potentially provide for each person on your inheritance list in a different manner. This is usually not necessary, but in some cases, it can be the correct course of action. Special needs planning for people with disabilities would certainly fit into this category.
When you are going to be passing down assets to someone in this position, you have to be concerned about government eligibility. Most people with disabilities get health insurance through Medicaid, and they receive income via the Supplemental Security Income (SSI) program.
These are need-based benefits, so a significant improvement in financial status can disrupt eligibility. This is why you should consult with an estate planning lawyer before you leave a direct inheritance to someone that is in this position.
Special Needs Planning
There is an ideal solution in the form of a supplemental needs trust. These devices are alternately referred to as special needs trusts. To implement this strategy, you establish and fund of the trust, and you designate a trustee to act as the administrator.
Any adult that is willing to assume the role can technically act as the trustee, and if you establish the trust, you can actually be the trustee. However, we are looking at this from an estate planning perspective, so you will not be around to administer the trust.
You can choose someone that you know that is an effective administrator with a good bit of financial and legal acumen. If you do not know anyone that would fit this description, you can use a professional fiduciary like a trust company or the trust department of a bank.
Medicaid does not cover every medical and dental procedure that a person may want or need. The maximum Supplemental Security Income payout this year is $841 a month for an individual, and this does not go far.
The beneficiary does not have direct access to the resources, and as you will learn, this is a good thing. However, the trustee would be able to purchase goods and services that improve the beneficiary’s life many different ways.
They can provide vacations with or without companionship, transportation, a specially equipped vehicle, training and tuition, electronic equipment, household furnishings, and on and on. Cash payments for food and shelter are the only prohibited expenditures.
Medicaid Estate Recovery
Medicaid is required to seek reimbursement from the estates of beneficiaries after they pass away. Since you cannot qualify if you have more than $2000 in countable assets in your name, there will usually be nothing for them to take.
The situation is different when there is a remainder a supplemental needs trust. As we have stated, the beneficiary does not have direct access to the resources, and they never owned the assets. For these reasons, assets that remain in the trust after their death would not be part of their estate.
This means that the property that is held by the trust would be protected during the Medicaid estate recovery phase. A successor beneficiary that you name in the trust declaration would assume the role.
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