There are many different tools that can be used when you are planning your estate. It is unwise to assume that you have to settle for limitations or suboptimal outcomes. In most cases, there is a particular device that can serve as the ideal solution. With this in mind, we will look at estate planning for people with disabilities in this post.
Need-Based Government Benefits
A lot of people with disabilities are unable to join the workforce, so they cannot get health insurance through their employers. Fortunately, there is a solution in the form of Medicaid. This jointly administered federal/state government health insurance program does cover individuals with limited resources. In Connecticut, there is a $1,600 limit on countable assets.
People with disabilities that qualify for Medicaid will typically receive Supplemental Security Income (SSI) as well. As the name would indicate, this is a modest source of income for people that can qualify.
If you leave a direct inheritance to someone that is relying on these programs, their financial profile would change. As a result, they could become ineligible for these much-needed benefits.
Special Needs Planning
As a response, if you want to leave an inheritance to someone with a disability, you can establish a supplemental needs trust. This device will sometimes be referred to as a special needs trust. The way that it works is you name a trustee to administer the trust after your passing. Of course, the loved one in question would be the beneficiary of the trust.
Under the program rules, the trustee would be able to satisfy the unmet needs of the beneficiary with few limitations. They can provide dental and medical procedures not covered by Medicaid, tuition, training, vacations, transportation, and countless other goods and services. As long as the rules are followed, eligibility for the benefits will not be impacted.
Medicaid Estate Recovery
After the death of a Medicaid beneficiary, the program is required to seek reimbursement from their estate. This rule has been instituted via legislative mandate. Since you cannot qualify if you have significant resources, there is usually nothing there for them to take.
However, the situation is different when there is a remainder in a supplemental needs trust. If you use your funds to establish the trust for someone else, it is a third party trust. The beneficiary would not own the assets, and they would not be able to directly access the resources.
As a result, those assets would not be part of their estate after they pass away. Medicaid would not be able to go after the remainder. They would be inherited by a successor beneficiary that you name when you establish the trust declaration.
Sometimes a person with a disability that is enrolled in these programs will come into money for some reason. It could be a personal injury settlement or judgment. Under these circumstances, the funds could be used to establish a first party or self-settled supplemental needs trust.
In this type of case, a trustee will still administer the trust, and they can use the funds to make the beneficiary more comfortable in many ways. On the downside, assets that remain in the trust would be subject to Medicaid estate recovery.
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As you can see, there are targeted solutions that can be implemented. When you choose our firm, we will gain an understanding of your objectives and your family dynamic. Subsequently, we will explain your options and provide recommendations so you can make fully informed decisions.
At the end of the process, you will go forward with a custom crafted plan that ideally suits your needs. If you are ready to get started, you can schedule a consultation at our estate planning offices in Westport or Glastonbury, CT if you call us at 860-548-1000. There is also a contact form on this site you can use if you would rather send us a message.
Mr. Horowitz was awarded his Juris Doctor degree with honors from the University of Connecticut School of Law. While attending law school, Mr. Horowitz received the American Jurisprudence Award in Legal Ethics and the Nathan Burkan Award.
After graduation from law school, Mr. Horowitz continued his legal education at New York University School of Law where he received a Post Doctorate Law Degree in Taxation. He has also recently received a national achievement award.
Mr. Horowitz is admitted to practice before all the state courts in the State of Connecticut and the United States District Court.
Mr. Horowitz was selected for Super Lawyers in 2021.
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