Estate planning is a personalized endeavor, and it should be viewed as such. The idea that you can simply slice up a pie through the terms of a last will is a shortsighted perspective. There are many different tools in the estate planning toolkit, and you should make the appropriate choices so that everyone that you love is being provided for in the best possible manner.
Medicaid and Supplemental Security Income
This dynamic is very apparent when it comes to providing for a family member with special needs. Clearly, people with disabilities are going to require care and treatment that can cost a great deal of money. For example, someone with autism will typically accumulate lifetime medical bills that reach the seven figures.
When you are looking at health care expenses of this magnitude, health insurance is a very big deal. Most of us get health insurance through our jobs, but people with disabilities are not going to be able to work in many instances. Under these circumstances, Medicaid can provide a solution.
The Medicaid program is a jointly administered state/federal government health insurance program that is potentially available to people who can demonstrate a significant level of financial need. Because of the fact that many people with disabilities are limited financially, they frequently qualify for Medicaid as a source of health insurance.
There is another government benefit program that is quite relevant to people with special needs that is called Supplemental Security Income or SSI. As the name would indicate, this program provides ongoing financial support to qualified applicants. Once again, you have to meet the financial need requirements to qualify for Supplemental Security Income.
Estate Planning Implications
Since these programs are only available to people who can prove that they have a significant level of financial need, there can be estate planning implications. If a person with special needs was to receive a significant direct inheritance, the change in financial status could cause a loss of benefit eligibility.
However, there are steps that can be taken to preserve eligibility for need-based government benefits. It is possible for a grandparent, a parent, a legal guardian, or a court to establish a first party special needs trust with assets that belong to a disabled individual who is relying on Medicaid and Supplemental Security Income. This would be a first party or self-settled special needs trust.
The person or entity who would administer the trust is the trustee, and the trustee would have exclusive control of the assets that are contained within the trust. The beneficiary would not be able to directly access funds from the trust, and the trustee would not be able to give the beneficiary direct cash gifts.
Supplemental Security Income is in place to provide the bare basics, like food and shelter, and Medicaid does not cover everything that is health related. Under government rules, the trustee would be allowed to use assets in the trust to satisfy the supplemental needs of the beneficiary, i.e. needs that are not being met by these benefit programs.
What are these needs? They would include things like recreation, transportation, telephone and television service equipment, Internet access, dental care, recreational outings, and many others.
The Medicaid program is required to seek reimbursement from the estates of people who were enrolled in the program. As a result, when a first party special needs trust has been established with assets that were the property of the beneficiary, anything that remains in the trust after the death of the beneficiary could be attached by Medicaid.
To avoid this, it is also possible to establish a third-party special needs trust with your own funds if you want to leave an inheritance to a person with special needs. The same situation would exist regarding the ability of the trustee to make the beneficiary more comfortable with assets that are contained within the trust. However, any remainder that may exist after the beneficiary’s death would not be subject to Medicaid reimbursement.
Download Our Special Report
We have provided a good bit of information about special needs planning in this blog post, but there is a lot more to digest if you want to be certain that you are taking all the right steps to preserve benefit eligibility.
Our firm has prepared an in-depth report that puts the subject of special needs planning under the microscope. We are offering this report to our readers on a complimentary basis, and you can learn a great deal if you download your copy.
To obtain access to the download, click this link: Hartford CT Special Needs Planning.
Mr. Nirenstein is licensed to practice before the courts of the State of Connecticut and the United States District Court. He is a member of the Connecticut and Hartford County Bar Associations, and the Estate and Probate, Elder Law, Business Law and Real Estate Sections of the Connecticut Bar Association.
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