One of the most compelling reasons why you should work with an estate planning attorney to devise your strategy is because you have options. As a layperson, there is no reason why you would know about all the different ways that you can facilitate asset transfers.
There is an ideal course of action to address just about any scenario. With this in mind, we will look at inheritance planning for people with special needs in this post. In the future, we will examine some other case-specific approaches to estate planning.
Medicaid and Supplemental Security Income
Most people get health insurance through their jobs, and a significant percentage of people with special needs are unable to work. Due to the financial ramifications, they have limited resources. As a result, they can qualify for Medicaid as a much needed source of health insurance.
Supplemental Security Income (SSI) is another need-based government program that provides a steady stream of modest income to people with special needs that can’t work.
Eligibility for these benefits is not necessarily permanent. If a recipient was to come into money, the change in financial status could cause a loss of eligibility. On the surface, this presents a challenge if you want to include someone with a disability on your inheritance list.
Supplemental Needs Trusts
A supplemental needs trust is the widely embraced solution. The government benefits help, but they do not satisfy all of the needs and desires of recipients. If you want to support someone with a disability without disrupting benefit eligibility, you could establish a supplemental needs trust.
You would fund the trust, name your loved one as the beneficiary, and empower a trustee to act as the administrator.
Under the rules of these programs, assets in the trust could be used by the trustee to make purchases that enhance the well-being of the beneficiary. It should be noted that the beneficiary would not have any direct access to the trust’s resources.
There are a wide range of different goods and services that could be obtained by the trustee without violating any of the guidelines. They range from vacations and electronic equipment to health care expenses that are not covered by Medicaid.
Medicaid Estate Recovery
There is another facet that we have to share to give you a more complete understanding.
Medicaid is required to seek reimbursement from the estates of individuals that were enrolled in the program during their lives. With this in mind, what happens to assets that are left in the trust after the death of the beneficiary?
If you fund a supplemental needs trust with your funds, it would be a third-party special needs trust. Under these circumstances, you would name a successor beneficiary in the trust declaration. After the death of the first beneficiary, the successor would assume ownership of the assets that remain in the trust. Medicaid would not be allowed to attach the funds.
It is possible for someone with special needs to establish a first party or self-settled special needs trust with their own money. This can often be necessary when someone is disabled because of injuries that they sustained in an accident that results in a personal injury settlement or judgment.
Under these circumstances, the remainder that is left in the trust would be available to Medicaid.
We Are Here to Help!
Estate planning is an absolute must during these difficult times, and it should be noted that a well-constructed estate plan will include advance directives for health care.
In spite of the circumstances, we are laser focused on the needs of people in our service areas.
We have adapted our structure to provide remote consultations over the phone and through video chat. An attorney from our firm can help you devise a plan in a completely safe manner.
To set up a meeting with someone from our Vermont office, you can give us a call at 802-879-7133. In Albany, the number is 518-389-6020, and there is a contact form on this website that you can use to send us a message.