Estate planning lawyers always emphasize the fact that there is no one-size-fits-all, cookie-cutter estate plan that is right for everyone under all circumstances. There are many different factors that go into it, and there are diverse strategies that can be implemented.

This is why it is extremely important to discuss your unique situation with an experienced, expert estate planning attorney before you make any decisions. People that act without enough information often make mistakes that yield significant negative consequences after they are gone. With this in mind, we will look at the value of special needs planning in this blog post.

Government Benefit Eligibility

You should think twice before you simply name a loved one with a disability in your last will or trust in an effort to provide a direct inheritance. Yes, your motivation may be very positive, but you should consider how a windfall of money could impact a person with special needs.

Many people with disabilities rely on Medicaid as a source of health insurance. Clearly, this is a lifeline for people with disabilities that may accumulate millions of dollars in health care bills throughout the course of their lives.

This program is only available to people with very limited financial resources. As a result, a significant change in financial status could trigger a loss of eligibility. The same thing is true for Supplemental Security Income (SSI). This program provides a bit of monthly income to people that have no personal earning power. Additionally, SSI eligibility often is tied to eligibility for other important support services, so loss of SSI also can result in loss of those support services.

Supplemental Needs Trust

What can you do if you are faced with these circumstances? The answer is that you could provide for a loved one with special needs through the creation of a supplemental needs trust.

Government benefits do not cover everything that the recipient may want or need. The powers-that-be are well aware of this fact, so the rules allow for some latitude. If you fund a supplemental needs trust for the benefit of someone with a disability, the trustee that you name would be allowed to use the assets in the trust to satisfy these unmet needs.

As long as everything is done in accordance with the regulations, eligibility for Medicaid and Supplemental Security Income would not be negatively impacted. Speaking of the importance of correct actions by the trustee, you may want to consider the utilization of a professional fiduciary that has the appropriate background to administer a supplemental needs trust.

Medicaid estate recovery is a part of the equation that you should understand when you are considering the matter of special needs planning. If you establish and fund a trust for the benefit of someone else with your money, it would be a third-party supplemental needs trust.

Medicaid is required to seek reimbursement from the estates of people that were enrolled in the program during their lives. Assets that remain in a third-party special needs trust after the death of the beneficiary would be protected from Medicaid. They would be transferred to a successor beneficiary that you name when you establish the trust declaration.

It is possible for a parent, a grandparent, a guardian, or a court to establish a special needs trust with assets that are the property of a person with special needs. This scenario can present itself when someone that is disabled due to injuries sustained in an accident receives a settlement.

A trust that is funded with the beneficiary’s personal assets would be a first party or self-settled supplemental needs trust. The dynamic would be the same with regard to the ability of the trustee to use the assets to make the beneficiary more comfortable in certain approved ways.

However, there is one major difference. Assets that are left in the trust after the death of the grantor/beneficiary would be available to Medicaid during estate recovery efforts.

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As you can see, it can take a bit of advanced planning to provide for some people that are on your inheritance list in the right manner. Our doors are open if you would like to discuss your estate planning goals with a licensed attorney.

We can gain an understanding of your situation and help you put the ideal estate plan in place if you decide to move forward. To set the wheels in motion, send us a message or give us a call at (585) 546-1734.