There are numerous ways to provide for your loved ones when you are planning your estate. To be optimally prepared, you should carefully consider the life situation of each person that will be receiving an inheritance. Sometimes, a mistake can be costly. With this in mind, in this post we will look at the legal device called the supplemental needs trust.
Impact of Direct Inheritance
If you have someone with a disability on your inheritance list, you should consider the potential impact of a direct inheritance. Many people who have special needs require expensive medical care and treatment. Health insurance is absolutely essential for these individuals.
Medicaid is a need-based government health insurance program. People who can demonstrate significant financial need can potentially qualify for Medicaid coverage. People with disabilities often find it difficult to earn income, so many individuals with special needs do in fact qualify for Medicaid.
There are income and asset limits that you must stay within if you want to qualify for Medicaid. Once you have obtained eligibility, the eligibility is subject to change on an ongoing basis. If you win the lottery, you would no longer have financial need, and you would no longer be qualified for Medicaid coverage.
The same thing is true of a significant direct inheritance. If you leave a loved one with a disability a direct inheritance via the terms of your last will, Medicaid coverage could be jeopardized.
In addition to Medicaid, many people with disabilities receive income through the Supplemental Security Income program. This is also a need-based program, so benefit eligibility could be jeopardized if a benefit recipient was to come into a good bit of money.
Supplemental Needs Trusts
You could safely provide for a loved one with a disability through the creation of a supplemental needs trust.
When you create this type of trust, you name a trustee. Government benefits do not pay for everything that the benefit recipient may require. Under benefit program rules, the trustee can use the assets that have been conveyed into the trust to provide for the supplemental needs of the beneficiary. Supplemental needs would be defined as needs that are not being paid for by government benefits.
A supplemental needs trust can make things more comfortable for a loved one without jeopardizing government benefit eligibility.
Download Our Free Special Needs Planning Report
There are a number of things to take into consideration if you want to leave an inheritance to someone with special needs, so you should be well informed. We have prepared a free special report that takes an in-depth look at special needs planning as it applies to children.
To obtain access to your copy of the report, click this link and follow the simple instructions: Special Needs Planning Report.