People with disabilities are often incapable of earning much income, so they qualify for need-based government benefit programs. Medicaid is a government run health insurance program that is jointly administered by the federal government along with the state government. It is potentially available to people who can prove that they have a significant level of financial need, and Supplemental Security Income can act as a source of support for disabled individuals with limited resources.
Once you become eligible for these need-based government benefits, your eligibility is not necessarily permanent. If you were a benefit recipient who was to come into some money, you could lose your eligibility.
In some cases, a person with a disability will receive a personal injury settlement. Under these circumstances, a legal guardian, a parent, or a grandparent could use the assets from the settlement to create and fund a first party special needs trust. These trusts are alternately referred to as self-settled special needs trusts.
The beneficiary could not directly access the assets in the trust without impacting benefit eligibility. However, the trustee could use the assets to satisfy needs that are not being met by the government benefits. As long as all of the program rules are followed correctly, ongoing benefit eligibility would not be jeopardized, but the beneficiary does have to be under the age of 65 when the trust is created.
We should point out the fact that the Medicaid program would seek reimbursement for monies spent from the estate of the beneficiary after his or her passing, so anything that is left in the trust would ultimately go toward the cost of the care that was received.
Third Party Special Needs Trusts
There is another type of special needs trust called a third party special needs trust. When this type of trust has been established, the same situation would exist with regard to the ability of a trustee to satisfy the supplemental needs of the beneficiary.
The major difference is that there would be no recovery efforts by the Medicaid program after the death of the beneficiary.
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