You should definitely sit down and have a meaningful conversation with an estate planning attorney when you are devising your inheritance plan. There is no one-size-fits-all strategy, and as a layperson, why would you know how to proceed given your unique set of circumstances?
There are strategies to suit every situation, so your estate plan should be custom crafted to optimally provide for all of the people that you love. With this in mind, we will look at inheritance planning for folks with special needs and Medicaid estate recovery in this post.
Government Benefit Eligibility
If you intend to provide for a person with a disability that receives government benefits, you have some things to think about. Medicaid is an essential source of health care insurance that many people with special needs rely on, and income is provided by the SSI program.
Since these benefits are only available to people with extremely sparse resources, an improvement in financial status could cause a loss of eligibility. This is why it is important to tread lightly when you are faced with this scenario during your estate planning efforts.
First Party Special Needs Trusts
A special needs trust can be established to provide a higher quality of life for someone that is relying on these benefits without impacting eligibility in any way. Under program regulations, a court, a legal guardian, a parent, or a grandparent could establish this type of trust with assets that are the property of the benefit recipient.
This would be called a first party or self-settled special needs trust. It should be noted that these devices are alternately referred to as supplemental needs trusts. The trustee that is named in the trust declaration would be empowered to use assets in the trust to make the beneficiary more comfortable in many different ways.
After the death of the beneficiary, Medicaid would be required to seek reimbursement from his or her estate. Since the assets in the trust were the property of the beneficiary when it was established, Medicaid would be able to attach the remainder during the recovery phase.
Third Party Supplemental Needs Trusts
If you were to establish this type of trust with your own funds, the situation would be the same with regard to the ability of the trustee to satisfy many of the needs of the beneficiary. The big difference is the fact that Medicaid would not be able to go after assets that remain in the trust after the beneficiary’s passing.
When the trust is created, you would name a successor beneficiary in the document. This individual or entity would assume ownership of assets that remain the trust after the death of the first beneficiary and Medicaid estate recovery would not be a factor.
Attend a Free Seminar!
We have covered one little slice of the overall estate planning pie in this brief blog post. If you would like to gain a more comprehensive understanding of the things that you need to know, we are offering some fantastic opportunities in the near future.
Our attorneys are holding a series of seminars that will cover many different important estate planning topics. Judging from the feedback that we receive from attendees, you will really find the time to be well spent, and there is no admission charge.
You can see the upcoming dates if you visit our seminar schedule page. Once you identify the session that works for you, click on it and follow the simple instructions to reserve your seat.