Many people with disabilities rely on Medicaid as a much-needed source of health insurance. These folks can also receive Supplemental Security Income (SSI), and this is largely self-explanatory.
These programs are only available to people that have less than $2000 in countable assets. Once eligibility for these programs has been granted, it is not necessarily permanent. If a benefit recipient was to come into money, their improved financial status could change everything.
They could lose eligibility for the benefits until they exhaust their own funds paying for their medical care and their living expenses. However, there is a solution in the form of a supplemental needs trust. These devices are alternately referred to as special needs trusts.
First-Party Special Needs Trust
Sometimes a person with a disability that is enrolled in these government benefit programs will receive a personal injury settlement or judgment. In other instances, a benefit recipient will be the beneficiary of an insurance policy, or they may receive a direct inheritance.
A person that is in position, or someone that has the legal right to act on their behalf, could convey the assets into a supplemental needs trust. They would not be able to touch the principal, and they would name a trustee to act as the trust administrator.
Medicaid does not cover every medical, therapeutic, and dental treatment and procedure, and the maximum monthly SSI payout in 2022 is $841, so it doesn’t go far.
Under the rules of these programs, the trustee would be able to use assets in the trust to satisfy the unmet needs of the grantor/beneficiary. The list of possible expenditures is a long one, but these are a few of the possibilities:
- Specially equipped van
- Vacations
- Paid companion
- School tuition
- Computers and other electronic equipment
- Furniture and other household items
- Place of residence
- Health care procedures not covered by Medicaid
Clearly, the resources would provide an enhanced quality of life, and if all rules are followed correctly, there would be no loss of government benefits.
Third Party Trusts and Medicaid Estate Recovery
Even though a person with a disability could use their own personal resources to fund a supplemental needs trust, there is a good reason why this should be avoided if it is at all possible.
Medicaid is required to seek reimbursement from the estates of people that were enrolled in the program while they were living. When a first party or self-settled special needs trust has been established by a grantor that will also be the beneficiary, Medicaid would be able to attach the remainder after their death.
On the other hand, if you establish a third-party trust with your own funds for the benefit of someone else, you would name a successor beneficiary when you draw up the trust. This individual would become the primary beneficiary after the death of the first beneficiary.
Medicaid would not be able to reach the assets that remain in the trust, so this is a much more favorable arrangement.
We Are Here to Help!
As you can see, there are targeted solutions that can be implemented to address specific estate planning concerns. When you work with our firm, we will gain an understanding of your situation and make recommendations based on the circumstances.
At the conclusion of the process, you will go forward with a tailor-made estate plan that is ideal for you and your family. Over the years, as things in your life change, we will be well-positioned to make adjustments if and when they become necessary.
We know that it can be disconcerting to speak about personal matters with someone you have just met. You can rest assured that we take this dynamic to heart, and we will make a concerted effort to make you feel comfortable from the start.
You can schedule a consultation at our Memphis, TN estate planning office if you call us at 901-763-2500 or 866-997-6325. If you would rather send us a message, fill out our contact form and we will get back in touch with you promptly.
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