Estate planning attorneys always emphasize the fact that personalized attention is key, because every situation is different. There is no universal estate plan that is right for everyone. Your financial profile will be part of the equation, and the life situation of each person on your inheritance list is something to take into consideration as well.
People With Disabilities
If you want to provide for a loved one with a disability, you should carefully consider the intricacies of government benefit eligibility. Clearly, people with special needs are going to require costly medical care throughout their lives. Health insurance is a must, and Medicaid is the solution for a high percentage of Americans with disabilities.Because it is intended for people with very limited financial resources, you cannot qualify if you have more than $2,000 in countable assets. A sudden windfall of money would change the financial profile of a Medicaid recipient. As a result, eligibility could be lost.
There is another need-based government program called Supplemental Security Income. The purpose of SSI is rather self-explanatory: it provides a source of modest income for people that do not have much personal earning power. Once again, an improvement in financial status could trigger a forfeiture of eligibility.
Supplemental Needs Trusts
You can work with an estate planning attorney from our firm to address the situation outlined above through the implementation of the appropriate special needs planning strategy. This will center around the creation of a legal device called a supplemental needs trust. People may sometimes refer to them as special needs trusts.The Medicaid program will pay for treatment and services within certain parameters, but individuals may have health care needs or preferences that are not covered. Supplemental Security Income provides a monthly benefit that is less than $800 right now. If this is the only source of financial assistance, the benefit recipient will have to make do without many basic comforts.
If you establish and fund a supplemental needs trust for the benefit of a loved one, you would name a trustee to act as the administrator. The beneficiary would not be able to directly access assets that have been conveyed into the trust. However, the trustee would be able to use the assets to satisfy approved supplemental needs that are not being met by the government benefits.The list of approved expenditures is quite broad. It would include one motor vehicle, classes and school tuition, elective surgery, dental work not covered by Medicaid, vacations, household furnishings, etc. You can definitely make a person with a disability much more comfortable through the creation of a supplemental needs trust.
Under program rules, Medicaid is required to seek reimbursement from the estates of people that were enrolled in the program. Since you cannot qualify if you have significant assets in your name, it is natural to assume that there would be nothing to take in most instances. However, what happens to assets that remain in a supplemental needs trust after the death of the beneficiary?
A trust that is established and funded by someone other than the beneficiary would be looked upon as a third-party special needs trust. If you create such a trust, you would name a successor beneficiary in the trust agreement. After the passing of the first beneficiary, the secondary beneficiary would assume ownership of the remainder.Medicaid would not be able to attach the assets, because they were the property of the trust, not the beneficiary.It is possible for a parent, a grandparent, a legal guardian, or a court to establish a supplemental needs trust with assets that are the property of the beneficiary. To avoid confusion, we did not touch upon this previously. When a person with special needs is the grantor of the trust and the beneficiary, it is considered to be a first party or self-settled special needs trust.
Everything would be the same with regard to the ability of the trustee to use assets in the trust to satisfy the supplemental needs of the grantor/beneficiary. However, there is one major difference. Assets that remain in the trust would be available to Medicaid after the passing of the beneficiary. This is why you would not want to give a direct gift or inheritance to a loved one and then establish a first party special needs trust on their behalf.
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If you would like to discuss special needs planning or any other relevant matter with a licensed attorney, our doors are open. You can send us a message to request a consultation appointment, and we can be reached by phone at 312-753-6000.