There are different ways that you can facilitate asset transfers to the people on your inheritance list. The right way to proceed will depend on the circumstances. Plus, you don’t have to provide for everyone in the same manner. Targeted solutions can be implemented to address the life situation of each respective person.
With this in mind, we are going to take a look at inheritance planning for people with disabilities in this post.
Medicaid and Supplemental Security Income
Obviously, people with disabilities are going to need expensive health care. Insurance is a must, but many of these folks cannot work, so they can’t get coverage through their employers. Fortunately, there is a solution in the form of Medicaid. It is a need-based benefit that is available to people that have very limited financial resources.
People with disabilities that qualify for Medicaid can also receive Supplemental Security Income (SSI). Every little bit helps, but it is very modest. In 2023, the maximum annual benefit for an individual that is receiving SSI is $10,970.44.
Once eligibility for these benefits is granted, it is not necessarily permanent. An improvement in financial status can potentially cause a loss of eligibility. This will be very relevant if you are going to be leaving an inheritance to someone that is relying on these programs.
Supplemental Needs Trust
If you are in this position, you could work with an estate planning attorney from our firm to establish a supplemental needs trust. This legal device is alternately referred to as a special needs trust, and the terms are used interchangeably.
When you establish the trust, you name someone to act as a trustee after you pass away. This can be someone that you know personally, and you can alternately use a professional fiduciary. Trust companies and other professionals provide trustee services for a fee, so this is an option.
Of course, the person that you want to help will be the beneficiary. When you are establishing the trust, you name a successor beneficiary as well. They would inherit assets that remain in the trust after the death of the primary beneficiary.
The assets in the trust can be used by the trustee to provide just about anything that the beneficiary may want or need. Direct cash payments for food or shelter are exceptions, but the penalty is not complete forfeiture of benefit eligibility. To sum it up, the assets will be used to make the beneficiary more comfortable, and the benefits will remain intact.
Medicaid Estate Recovery
Under federal law, the Medicaid program must seek recovery from the estates of deceased beneficiaries. Because it is a need-based program, there is usually nothing in the estate after the death of the beneficiary, so this is not a problem. However, the dynamic is different when there is a remainder in a supplemental needs trust.
When you use your funds to establish a trust for the benefit of someone else, it is a third party trust. With this type of trust, estate recovery is not a factor. Medicaid cannot go after the remainder; it would go to the successor beneficiary that you named in the trust declaration.
However, it is possible for someone with a disability to use their own funds to establish a supplemental needs trust. This would be a first party or self-settled trust. Assets that remain in the trust after their death would be part of their estate, so it would be available to Medicaid during the recovery phase.
We Are Here to Help!
Our doors are open if you are ready to work with a Glastonbury or Westport, CT estate planning lawyer to put a plan in place. You can send us a message to request a consultation appointment, we can be reached by phone at 860-548-1000.