Estate planning is not just a matter of splitting up a pie into slices. When you are planning your estate, you should consider the life situation of each person on your inheritance list, because you have options. With this in mind, we will look at the value of a special needs trust in this post.
Government Benefit Eligibility
Many people with disabilities are enrolled in the Medicaid program. Medicaid is a health insurance program that is jointly run by the federal government along with each respective state government.
As you can imagine, this health insurance is very important to people with disabilities who are receiving ongoing care and treatment. Depending on the disability in question, medical expenses can enter the millions of dollars over the course of a lifetime.
Medicaid is a program that is available to people who can demonstrate significant financial need. Many people with disabilities cannot work, so they do in fact have limited financial resources.
Once you obtain Medicaid eligibility as a disabled individual, your eligibility is not necessarily permanent. If you were to undergo a change in financial status, you could be deemed ineligible for need-based government benefits.
Suppose you leave a significant direct inheritance to a person with a disability via the terms of your last will. All of a sudden, this individual will be catapulted into a different financial stratosphere. As a result, he or she could lose government benefit eligibility.
Special Needs Trusts
When you want to provide assets for someone with a disability who is receiving government benefits, you can make this person the beneficiary of a special needs trust. These devices are alternately called supplemental needs trusts.
Many people who are enrolled in the Medicaid program also receive ongoing income through the Supplemental Security Income program. Eligibility for this program is also based on financial need.
Medicaid and Supplemental Security Income will provide for many of the needs of the person in question, but not all of them. When you create a special needs trust, you name a trustee. The trustee can use assets that have been conveyed into the trust to satisfy needs that are not covered by government benefits.
These expenditures would not impact government benefit eligibility.
It should be noted that the beneficiary cannot directly handle the funds that have been conveyed into the special needs trust. The trustee must handle the assets and approve expenditures.
Special Needs Planning Report
If you would like to learn more about special needs planning, we have a valuable resource that you can access through this website. Our firm has prepared a series of special reports, and one of the reports takes an in-depth look at special needs planning.
To access the report, click this link: Special Needs Planning Report.