It is important to be absolutely certain that you are providing for everyone that you love in the ideal manner when you plan your estate. This is why personalized attention is key, because if you make mistakes, your good intentions could ultimately yield negative results.
With this in mind, we will look at the value of a third-party special needs trust in this blog post.
Need-Based Government Benefits
If you have someone with a disability in your family, you may want to make this loved one more comfortable when you are engaged in your inheritance planning efforts. Without question, some additional financial resources could make a world of difference in innumerable ways.
However, before you leave a direct inheritance to a person that is in this situation, you should consider the implications with regard to need-based government benefits.
Most people with disabilities are reliant on the Medicaid program as a much needed source of health insurance. Another benefit that individuals with special needs will often qualify for is Supplemental Security Income (SSI). The name is more or less self-explanatory: SSI provides an ongoing source of income for people with no personal earning power.
The limit on countable assets is very low, so a windfall could trigger a loss of eligibility for these benefits. This being stated, sometimes a person that is in this position will come into money through a personal injury settlement or judgment or some other source.
Under these circumstances, the funds could be used to fund a first party or self-settled special needs trust. The trustee that is named would be able to use assets in the trust to provide for the unmet needs of the beneficiary.
As long as no rules are broken, eligibility for the government benefits would remain intact. That’s the good news, but the bad news is that Medicaid could swoop in to assume ownership of the remainder that is left in the trust during estate recovery efforts.
However, if you were to establish this type of trust with your own funds, it would be a third-party special needs trust.
In the trust declaration, you would name a beneficiary to succeed the first beneficiary. After the passing of the individual with special needs, the successor beneficiary would assume ownership of the assets that remain in the trust. Medicaid would not be able to go after these resources.
This is why it is preferable to create a third-party special needs trust if you want to help out a loved one with a disability without disrupting eligibility for government benefits.
Access Our Worksheet
In addition to the treasure trove of content that you can find in this blog, we offer a number of additional educational resources. One of them is our estate planning worksheet, and we get very positive feedback from people that have taken the time to go through it.
This resources is free, and you can visit our worksheet access page to get your copy.
Discuss Your Objectives With an Estate Planning Attorney!
As we stated in the opening, personalized attention is essential if you want to plan your estate in the ideal manner. You undoubtedly have questions about how you should proceed given your unique situation, and you can rest assured that we can provide you with the answers.
We are here to help if you are ready to schedule a consultation with an attorney from our firm. There is no need to take pause, because we have the unique ability to put our new clients at ease from the start. To set the wheels in motion, send us a message through our contact page or give us a call at 860-548-1000.
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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