We always emphasize the fact that personalized attention is key when you are planning your estate. There is no cookie-cutter, one-size-fits-all estate planning strategy. There are many tools in the estate planning toolkit as it were, so you should understand your options so that you can make fully informed decisions. With this in mind, we will look at special needs planning in this post.
Need-Based Benefits
Many people with disabilities are going to require costly medical care throughout their lives. Most individuals in the United States with health insurance get it through their employers, and people with special needs cannot work in many instances. Fortunately, there is a solution in the form of Medicaid. This government health insurance program is available to people that have very limited financial resources.
Once eligibility for Medicaid is granted, it is not necessarily permanent. A change in financial status could lead to a forfeiture of coverage. As a result, if you leave a significant direct inheritance to someone that is enrolled in this program, Medicaid eligibility would be lost.
There is another program that many people with disabilities rely on called Supplemental Security Income. The name is self-explanatory; SSI provides a modest but steady stream of income for qualified people that are disabled. This is also a need-based program, so eligibility can be impacted by a windfall of money.
Special Needs Trusts
To address the above scenario, you could establish a special needs trust. These devices are alternately referred to as supplemental needs trusts. You fund the trust, and you name a trustee to administer the trust. If you choose to do so, you can act as the trustee, and you could name a successor trustee to handle the tasks after you pass away. Of course, the loved one that you want to provide for would be the beneficiary of the special needs trust.
The government benefits do not satisfy all of the needs of the recipient. These are “supplemental needs,” and this is where the name of the device comes from. Under government rules, the trustee can use assets in the trust to satisfy these supplemental needs, and benefit eligibility would not be impacted.
There are countless different goods and services that can be purchased with money in a special needs trust. These would include medical and dental treatments that are not covered by Medicaid, vacations, transportation expenses, tuition, insurance, furniture and other household items, pets, home improvements, fitness equipment, and many others.
Estate Recovery
Medicaid is required to seek reimbursement from the estates of benefit recipients. When you establish a trust for the benefit of someone else with your own money, it is considered to be a third-party special needs trust. After the passing of the beneficiary, Medicaid would not be able to go after any assets that remain in the trust. They would be transferred to a successor beneficiary that you name in the trust declaration.
This being stated, in some cases, a person with a disability that relies on these programs will receive a personal injury settlement or come into money in some other manner. Under these circumstances, that person, a parent, a grandparent, a court, or a legal guardian could use the funds to establish a special needs trust.
The same rules would apply with regard to the utilization of assets in the trust to improve the beneficiary’s quality of life. However, Medicaid would be able to seek recovery from assets that remain in the supplemental needs trust after the death of the grantor/beneficiary.
Download Our Free Estate Planning Worksheet
Our Bath Medicaid lawyers have prepared an estate planning worksheet that you can utilize to gain a more complete understanding of the process. It is being offered free of charge right now, so you have everything to gain and nothing to lose if you access your copy. To do just that, visit our worksheet download page and follow the simple instructions.
Schedule a Consultation Today!
Written information is great, but there is no substitute for a meaningful, one-on-one conversation with a licensed estate planning lawyer. Our doors are open if you would like to discuss your objectives with one of our attorneys. You can request a consultation appointment right now if you give us a call at 585-374-5210. There is also a contact form on this website that you can use if you would prefer to send us a message through the Internet.
Michael Robinson, Estate Planning Attorney
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