If you have a person with special needs in the family, you should definitely consider the ramifications. There are different ways to facilitate postmortem asset transfers, and the right choice for one family member may not be appropriate for another.
This is why personalized attention from an estate planning lawyer is key, and that’s exactly what you get when you work with our firm. In this blog post, we will look at a situation that can be optimally addressed through the utilization of a particular type of trust.
Government Benefit Eligibility
If you have a loved one with a disability that you would like to help out when you are planning your estate, you have to be concerned about government benefit eligibility. A large percentage of people with special needs rely on Medicaid as a source of health insurance, and you cannot qualify if you have significant assets in your own name.
Another program called Supplemental Security Income is often relied upon as well. As the name would indicate, this serves as a source of income for people that do not have any earning power.
A significant change in financial status could trigger a period of ineligibility for these benefits until the resources were exhausted.
There is a reasonably sound solution that could be implemented if a person with special needs was to receive an inheritance, a personal injury settlement, or some other windfall. However, we will suspend our explanation of this possibility to avoid confusion.
Third Party Supplemental Needs Trust
The widely embraced estate planning solution for this type of situation is the utilization of a third-party supplemental needs trust. These devices are alternately referred to as special needs trusts.
To implement this strategy, you fund the trust, and you name a trustee to act as the trust administrator. It can be a family member or someone else that you know, but it is extremely important for the trustee to follow the rules precisely. For this reason, you may want to use a professional fiduciary like the trust department of a bank or a trust company.
Medicaid and SSI are not going to satisfy all of the needs of the benefit recipient. Under program rules, the trustee is allowed to use assets in the trust to meet these supplemental needs. There are a very wide range of different types of purchases that are approved. They would include vacations, household items, school tuition, and medical and dental procedures that are not paid for by Medicaid, just to name a handful.
Medicaid Estate Recovery
Now we can get to the point that we were suspending previously. The Medicaid program is required to seek reimbursement from the estates of people that were receiving benefits during their lives. If you were to establish a supplemental needs trust for the benefit of someone else with your funds, it would be a third-party supplemental needs trust. Under these circumstances, any resources that may be left in the trust after the death of the beneficiary would not be available to Medicaid during their reimbursement efforts.
It is possible for a parent, a grandparent, a legal guardian, or a court to use funds that are the property of a person with a disability to fund a supplemental needs trust for this individual’s benefit. The same rules would apply with regard to the trust administrator’s ability to use funds in the trust to make the beneficiary more comfortable.
However, after the death of the beneficiary, the remainder that is still in the trust could be attached when Medicaid engages in their recovery attempt.
Attend a Free Seminar!
Our estate planning attorneys are holding some very informative seminars in the near future. You can walk away with some extremely useful information if you attend the session that works for you. Best of all, there is no charge, so you have everything to gain and nothing to lose.
To get all the details, visit our seminar schedule page and follow the simple instructions to register for the particular gathering that you would like to attend.