There are pointed approaches that can be taken to address every type of inheritance planning challenge. With this in mind, when you are planning your estate, you should consider the life situation of every person on your inheritance list.
A perfectly acceptable way to transfer assets to one person may not be appropriate for the next, and this definitely applies to an inheritance that you want to leave to a person with a disability.
Need-Based Government Benefits
Most Americans get insurance through their employers, but a significant percentage of people with disabilities are unable to enter the workforce. Fortunately, Medicaid provides a healthcare insurance safety net for individuals with limited resources.
People with disabilities that qualify for Medicaid typically receive Supplemental Security Income (SSI). As the name would indicate, this is a modest but welcome source of income.
These are need-based programs that are only available to people with very limited assets. If you were to leave a direct inheritance to someone that is relying on these benefits, it could impact their eligibility status.
Supplemental Needs Trust
Medicaid does not cover every health care related procedure or treatment that a person may want or need. The maximum monthly Supplemental Security Income benefit for 2020 is $784, so this is certainly not going to go very far.
There is a solution in the form of a supplemental needs trust. These devices are alternately referred to as special needs trusts, so the terms are often used interchangeably.
If you establish a supplemental needs trust for the benefit of a loved one, you would name a trustee to act as the administrator. Technically, any competent adult can act as a trustee, but you may want to use a professional fiduciary that has the appropriate experience and expertise.
The trustee would be able to use assets in the trust to satisfy the unmet needs of the beneficiary. Assets in the trust can be utilized to cover many different expenses, including therapy, rehabilitation, travel and vacations, a specially modified van, and even a home.
As long as everything is done properly, ongoing benefit eligibility would not be impacted.
First Party Trusts and Medicaid Estate Recovery
It is possible for someone with a disability to use their own resources to establish and fund a supplemental needs trust. This would be a first party or self-settled trust.
The trustee would have the same ability to use the assets to make the beneficiary more comfortable without triggering a loss of benefits. However, there is a reason why a third-party trust is preferable.
Medicaid is required to seek reimbursement from the estates of deceased beneficiaries. When a third party special needs trust has been established, Medicaid would not be able to touch the remainder. It would go to a successor beneficiary that was named in the trust declaration.
They would be able to go after assets that remain in a first party trust, and this is why the third-party variety should be used if it is at all possible.
Attend a Free Seminar
We are conducting a number of seminars over the coming weeks, and you can learn a lot if you attend one of these sessions. They are being offered free of charge, but we ask that you register in advance so we can reserve your seat.
You can see the dates if you visit our seminar schedule page. When you identify the session that you would like to attend, follow the simple instructions to register.
Need Help Now?
If you are ready to put an estate plan in place, we can work with you to develop the ideal strategy for you and your family. You can set the wheels in motion if you give us a call at 860-548-1000.
There is also a contact form on this site you can use to send us a message, and if you reach out electronically, you can expect to receive a prompt response.
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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