Estate Planning | Making a Difference One Family at a Time

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special needs planningThere are different ways to provide inheritances, and a suitable method for one person may not be appropriate for the next. This dynamic enters the picture in a big way when you’re leaving an inheritance to someone with a disability. With this in mind, let’s take a look at special needs planning.

Need-Based Benefits

Most insured Americans who are not eligible for Medicare receive their coverage through their employers. A significant percentage of people with disabilities are not in a position to hold jobs, so this avenue is not available to them.

Obviously, health insurance is going to be particularly important for these folks. Fortunately, there is a solution in the form of Medicaid coverage. This jointly administered federal/state government health insurance program is available to people with limited financial resources.

People with disabilities who qualify for Medicaid can also receive Supplemental Security Income (SSI), which is self-explanatory. The maximum SSI benefit is less than $1,000 a month, but every little bit helps.

If you leave an inheritance to someone who is relying on these benefits, they would be in a different financial position. This can result in the loss a benefit eligibility, but there is a widely embraced solution

Supplemental Needs Trust

A supplemental needs trust is an estate planning tool that can be ideal for people with disabilities. To implement this strategy, you fund the trust, and you name a trustee to act as the administrator.

Any adult willing to take on the role can technically act as the trustee, and there is another option. You could engage a professional fiduciary to manage the trust. Trust companies, the trust departments of banks, and other professionals provide trustee services.

Yes, there is an expense involved. At the same time, you will be certain that the trust is managed properly if you utilize a professional. In addition to the money management, the trustee will understand the implications of eligibility for Medicaid and SSI.

The beneficiary would not be able to directly access assets that are contained in the trust, and they would not directly own the assets. As a result, the resources in the trust would not count against them from a benefit eligibility perspective.

Enhanced Quality of Life

Under the rules of the programs, the trustee would be able to provide goods and services that make the beneficiary more comfortable in many different ways. Direct payments for food and shelter are not permitted, but everything else is on the table.

The trustee can use assets in the trust to provide vacations, medical and dental care that is not covered by Medicaid, tuition and training, a specially equipped vehicle, electronics, musical instruments, and on and on.

Medicaid Estate Recovery

Medicaid is required to seek reimbursement from the estates of deceased beneficiaries. Given this reality, what happens to the remainder after the beneficiary’s death?

If you fund the trust for the benefit of someone else, it is a third-party trust. The beneficiary never directly owned the assets. As a result, they are not part of the beneficiary’s estate. A successor you name will inherit assets and Medicaid cannot touch them.

Funds that belong to a benefit recipient could be used to establish a self-settled or first-party supplemental needs trust. The trustee would have the same latitude to use the assets to improve the beneficiary’s quality of life. However, the remaining assets would not be protected from Medicaid estate recovery.

Attend a Complimentary Seminar!

We would like to invite you to attend one of our upcoming estate planning seminars. There is no charge to attend, and they are held at comfortable locations throughout Connecticut.

This is a great opportunity that you should not pass up, and you can obtain more information if you visit this page: Westport and Glastonbury, CT Estate Planning Seminars.

John McCann, Estate Planning Attorney
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