There are pointed estate planning solutions that can be utilized to satisfy certain specific objectives. The best way to provide assets to one person on your inheritance list may not be appropriate for the next. This certainly applies to estate planning for people with disabilities.
Government Benefit Eligibility
Medicaid is a jointly administered federal/state government health insurance program for people with limited resources, and many individuals with disabilities qualify for Medicaid. Supplemental Security Income (SSI) is a much-needed source of financial support.
There is an asset limit of $2000, and eligibility is not necessarily permanent. If a benefit recipient was to receive a personal injury settlement or judgment or a direct inheritance, their financial profile would change. In those circumstances, benefit eligibility would be lost if they maintain direct possession of the assets.
First Party or Self-Settled Supplemental Needs Trust
As a response to the potential loss of eligibility, a windfall could be used to establish a first party or self-settled supplemental needs trust. These trusts are alternately referred to as special needs trusts, and the terms are used interchangeably.
The grantor/beneficiary of the trust would not be able to act as the trustee, and they would not be able to directly access the assets. However, the trustee would be empowered to use the resources to make the beneficiary more comfortable in many different ways.
They could provide a home, a specially equipped van, medical and dental treatments that are not covered by Medicaid, vacations, electronic equipment, and countless other goods and services.
Eligibility for Medicaid and Supplemental Security Income would not be impacted as long as the trustee follows the guidelines correctly.
Third Party Trust and Medicaid Estate Recovery
If you are going to leave an inheritance to someone with a disability, you would not want to leave them a direct inheritance.
Why is this the case?
There is a Medicaid estate recovery process. The program is required to seek reimbursement from the estates of people that were using Medicaid while they were living. In most cases, there is nothing to take, because you can’t qualify if you have significant assets in your name.
When there is a supplemental needs trust, the situation is different. If the trust is a first party special needs trust, Medicaid would be able to attach the assets that remain in the trust after the death of the beneficiary.
On the other hand, if you establish a supplemental needs trust for the benefit of a loved one with your funds, it would be a third party trust. Under these circumstances, the assets would be protected during Medicaid recovery efforts.
When you draw up the trust declaration, you would name a successor beneficiary. This individual would become the active beneficiary after the death of the original beneficiary.
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We make an effort to connect with members of our community to share important information about elder care and estate planning topics. During the pandemic, we have been providing webinars, and we will once again hold in-person seminars when it is prudent.
You can head over to our webinar schedule page to see the upcoming dates. When you identify the event you would like to attend, follow the simple instructions to register so we can reserve your spot.
Need Help Now?
If you are ready to work with a Naperville estate planning attorney to put a plan in place, we are here to help. You can send us a message to request a consultation appointment, and we can be reached by phone at 630-568-8611.
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