Most Americans get health insurance through their employers, but this is not an option for people with disabilities that cannot work. They certainly need health insurance, and fortunately, there is a solution in the form of Medicaid coverage.
Individuals with disabilities that qualify for Medicaid can also receive Supplemental Security Income (SSI), and this is self-explanatory. The program provides a very modest stream of monthly income for people that have little-to-no earning power.
These are need-based benefits, so you cannot qualify if you have significant assets in your name. A sudden windfall can cause a loss of eligibility, and this is something to keep in mind if you are going to be leaving an inheritance to a person with a disability.
Supplemental Needs Trust
If you are in this position, you could make a loved one more comfortable without impacting the benefits if you establish a supplemental needs trust. This device is alternately referred to as the special needs trust.
You would fund the trust and name a trustee to act as the administrator. The trustee can be someone that you know personally, and you could actually act as the trustee. However, if you are using the trust as an estate planning tool, you will not be around to administer the trust.
There is another option that can be preferable when certain circumstances exist. Trust companies and the trust departments of banks provide trustee services, and a professional fiduciary could be relied upon to manage the assets effectively.
The beneficiary would have no direct access to the assets, but the trustee would be able to use the resources to improve the beneficiary’s quality of life in a multitude of ways.
They could use the funds to pay for a specially equipped vehicle, vacations, electronic equipment, leisure and recreational activities, and medical and dental procedures that are not covered by Medicaid. This is just a partial rundown, but everything is in play except for food and shelter.
With regard to shelter, the trustee could actually purchase a home for the beneficiary to live in, but the SSI benefit would be reduced if the trustee covers rent payments.
Medicaid Estate Recovery
Sometimes a person with a disability will receive a personal injury settlement or judgment, life insurance proceeds, or they may come into money in some other way. Under these circumstances, the resources can be used to fund a first-party or self-settled supplemental needs trust.
The rules are the same with regard to the trustee’s ability to make the beneficiary more comfortable without impacting the benefits.
However, there is a Medicaid estate recovery mandate. The program is required to seek reimbursement from the estates of deceased beneficiaries.
When a first-party special needs trust has been established, the assets that remain in the trust after the death of the beneficiary would be available during the Medicaid recovery phase.
On the other hand, if you fund a trust for the benefit of someone else, it would be a third-party trust. Under these circumstances, Medicaid would not be able to go after the assets that are left in the trust.
A successor beneficiary that you name in the trust declaration would assume the role after the first beneficiary’s passing.
We Are Here to Help!
If you would like to discuss special needs planning with a Memphis, TN estate planning lawyer, our doors are open. We can learn about your situation and help you devise a comprehensive plan that provides for all of your loved ones in the ideal manner.
Though our office is physically located in Memphis, we have attorneys that are licensed in Mississippi and Arkansas, so we can help if you live in one of these states.
You can schedule a consultation appointment right now if you call us at 901-763-2500 or 866-997-6325 or fax us at (901) 763-2525. If you would rather reach out through the Internet, fill out our contact form and we will get back in touch with you promptly.
