Many individuals with disabilities rely on Medicaid as a much-needed source of health insurance, and they can also receive Supplemental Security Income (SSI). These are need-based programs, so you cannot qualify if you have significant assets.
Once eligibility has been granted, it is not necessarily going to stay in place for the rest of the beneficiary’s life. An improvement in financial status could cause a loss of benefits, and this presents a challenge if you are going to be leaving an inheritance to someone with a disability.
Supplemental Needs Trust
If you have person with a disability on your inheritance list, you could establish a supplemental needs trust. This legal device is alternately referred to as the special needs trust.
To implement this strategy, you fund the trust and you designate a trustee to act as the administrator. This can be an individual you know personally, and you can actually act as the trustee, but you would not do so if you are using the trust for estate planning purposes.
The trustee will manage the assets on behalf of the beneficiary that is relying on the government benefits. If you do not know anyone that is a suitable candidate, trust companies, the trust departments of banks, and some other professionals provide trustee services for a fee.
After the trust has been created, the beneficiary would not be able to directly access the principal. However, the trustee would be able to use the assets in the trust to enhance the beneficiary’s quality of life in many ways.
They can pay for medical and dental procedures not covered by Medicaid, vacations, leisure and recreation activities, computers, training, tuition, and countless other goods and services. The only expenditures that are not approved are distributions that are directly used for food or shelter.
However, with regard to shelter, the trust can actually purchase a home for the beneficiary to live in because a home is not a countable asset.
If some of the money is used to pay for food or shelter, it would not necessarily result in a total loss of benefits. There would simply be a reduction in the Supplemental Security Income payout.
Medicaid Estate Recovery
After the death of the beneficiary, Medicaid is required to seek reimbursement from their estate. Since you cannot qualify if you have significant assets in your name with the exception of a home, there is usually nothing for them to take during the recovery phase.
The dynamic is different if a supplemental needs trust has been established because there can be a remainder left in the trust after the death of the beneficiary.
If you fund a special needs trust with your own money, it would be a third-party trust. Medicaid would not be able to go after assets that remain in the trust after the beneficiary’s passing. They would go to a successor that you name when you draw up the trust agreement.
A person with a disability could use their own funds to establish a first party or self-settled supplemental needs trust. Medicaid would be able to attach the remainder that is left in a first party trust.
Attend a Free Webinar!
We are conducting a series of webinars over the coming weeks that will cover some very important estate planning and elder care topics. There is no admission charge, and you can join us from anywhere, so this is a great way to build on your knowledge.
You can see the dates if you visit our webinar page, and when you identify the session you would like to attend, follow the simple instructions to register.
Need Help Now?
If you already know that you should work with an estate planning attorney to put a plan in place, there is no time like the present. We can gain an understanding of your situation and apprise you of your options so you can make fully informed decisions.
At the end of the process, you will go forward with a custom crafted plan that is ideal for you and your family.
You can schedule a consultation appointment right now if you call us at 802-879-7133, and you can use our contact form if you would rather send us a message.
Wendy now works with clients on estate plans, including Trusts, Wills, Powers of Attorney, and Advanced Directives.Wendy also assists clients with Medicaid Planning and helps clients to qualify for Medicaid assistance.Wendy is a member of the Vermont Bar Association and both the national and Vermont chapter of the National Academy of Elder Law Attorneys.
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