There is a legal device called a special needs or supplemental needs trust that is used to provide resources for a person with a disability. We will explain the details in this post with an emphasis on the self-settled or first-party trust.
Government Benefit Eligibility
Obviously, people with disabilities are going to need health insurance. Most Americans get insurance through their employers, and many folks with disabilities are not part of the workforce, so this is not an option.
As a result, they do not have significant monetary capabilities. Fortunately, the Medicaid program will provide health insurance for people who have limited resources. Supplemental Security Income (SSI) is a source of monthly cash for individuals with disabilities, and the two benefits work in tandem with one another.
You cannot qualify if you have more than $2,000 in countable assets in your name, and eligibility is not necessarily permanent. An improvement in financial status could lead to a loss of benefits, so a challenge is presented if a beneficiary receives a windfall for some reason.
First-Party Special Needs Trust
If a benefit recipient were to come into money, the funds could be used to establish a first-party special needs trust. The person with a disability would not be able to act as the trustee, and they would have no direct access to the assets that they conveyed into the trust.
This individual or a legal representative would designate a trustee to act as the trust administrator. The trustee can be a family member or someone else who has a personal connection, and a professional fiduciary would be an alternative.
Medicaid does not cover every medical, dental, and therapeutic treatment that someone may want, and the maximum Supplemental Security Income payout this year is $943 a month. This is not going to go very far when it is your only source of income.
The trustee would be able to use the assets in the trust to provide many different goods and services that enhance the life of the beneficiary. They could provide a home, a vehicle, special equipment, vacations, electronics, and training, just to name a handful of the possibilities.
Government benefit eligibility would not be negatively impacted as long as the trustee acts within the guidelines.
Medicaid Estate Recovery
After the death of a Medicaid beneficiary, the program is required to seek reimbursement from their estate. When a self-settled (first party) special needs trust has been established, Medicaid can recover property that remains in the trust.
It is possible for a third party (a family member, for example) to use their own funds to establish a supplemental needs trust for the benefit of someone else. You can do this for a family member while you are living, and people sometimes create these trusts when they are planning their estate.
Everything would be the same with regard to the ability of the trustee to enhance the beneficiary’s quality of life. One major difference is the fact that Medicaid cannot go after the assets that remain in the trust after the death of the beneficiary.
When the trust is established, the grantor of the trust will name a successor beneficiary. After the first beneficiary’s death, the successor would actively assume the role.
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As you can see from this post, there are different ways to provide for the people on your inheritance list, and there can be a lot of things to think about.
This is why you should work with an estate planning attorney to develop a plan that is custom-crafted to suit your needs.
We know that it can be a bit disconcerting to share personal information with someone you have just met. This is understandable, and you can rest assured that we will go the extra mile to make you feel comfortable from the first moment that you walk through our doors.
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