If it is done correctly, estate planning will involve careful consideration of the life situation of each inheritor. You should take a personalized approach and make sure that you are providing for each person that you love in the ideal manner.
This is especially important if you have someone with a disability on your inheritance list. People with disabilities are clearly going to require health insurance. Most people get health insurance through their jobs, but a significant percentage of people with disabilities cannot work.
For these people, Medicaid is a lifesaver. This is a government health insurance program that is available to people who can prove that they have a significant level of financial need.
Once you obtain eligibility for Medicaid, your status is not necessarily permanent. If someone who is enrolled in the Medicaid program was to come into some money via an inheritance, eligibility could be forfeited.
To address this type of situation, you could create a special needs trust. These trusts are also called supplemental needs trusts.
When you create the document, you name a trustee. The trustee will handle the assets that have been conveyed into the trust. You can use a person that you know, but you could alternately use a professional fiduciary like a trust company or the trust section of a bank.
In addition to Medicaid, there is another government program called Supplemental Security Income. This program provides a minimal source of income for people with disabilities who cannot earn much on their own.
The government benefits are not necessarily going to satisfy all of the needs of the individual in question. Under program rules, the trustee could use assets that have been conveyed into a supplemental needs trust to improve the beneficiary’s quality of life.
Certain types of expenditures are allowable, so the government benefit eligibility would not be impacted as long as the trustee follows all of the rules correctly.
Under some circumstances, the Medicaid program will seek reimbursement from a recipient’s estate after his or her passing. If you create a special needs trust for the benefit of someone else using your own money, it would be a third party special needs trust. When a third party special needs trust is in place, there would be no reimbursement efforts after the death of the beneficiary.
If you want to provide for someone with a disability without impacting benefit eligibility, a supplemental needs trust can provide a solution.
Download Our Special Report
You should go forward in a fully informed manner if you have a person with special needs on your inheritance list. To obtain more detailed information about special needs trusts, download our in-depth report.
The report is free, and you can visit this page to access your copy: Free Report on 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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