You have to evaluate the implications when you are leaving inheritances to a number of different people that are in different life situations. If you have a loved one with a disability, a particular estate planning strategy is required, and we will explain the details in this blog post.
Government Benefits
Most people get health insurance through their employers, and a significant percentage of individuals with disabilities do not have the ability to work. This is a bad combination, because these people certainly need health insurance. The same thing is true of the income that we all need to survive.
Fortunately, there are government programs to fill these gaps. Medicaid is the health insurance program that is available to people with special needs and others that have very limited financial resources. Supplemental Security Income is a source of ongoing cash for qualified recipients.
Once eligibility has been granted, it is not necessarily permanent. An improvement in financial status could lead to a loss of eligibility. This would be the dynamic if you leave a direct inheritance to someone that is relying on these need-based government benefits.
Special Needs Trust
The widely embraced solution for this type of scenario is the creation of a supplemental needs trust. These legal devices are often referred to as special needs trusts.
If a benefit recipient was to receive a direct inheritance, they could convey assets into this type of trust. They could not act as the trustee, and they would not be able to control the assets that have been conveyed into the trust.
A suitable trustee would be empowered, and the person that received the inheritance would be the beneficiary. Under the rules of these programs, the trustee would be allowed to utilize the money in the trust to make the beneficiary more comfortable in many different ways.
As long as everything is done correctly, there would be no negative impact on benefit eligibility.
A trust that is created with funds that are the property of the beneficiary would be a first party or self-settled special needs trust. If you establish and fund the trust with your own money for the benefit of someone with special needs, this would be looked upon as a third-party special needs trusts.
Medicaid Estate Recovery
Medicaid is required to seek reimbursement from the estates of people that were enrolled in the program during their lives. If a first party supplemental needs trust has been established, Medicaid would be able to attach assets that remain in the trust after the death of the grantor/beneficiary.
Things are very different with a third-party special needs trust. When you establish this type of trust for the benefit of someone else, you would name a successor beneficiary. After the death of the first beneficiary, the remainder would go to the successor. Medicaid would not be able to touch these funds.
Attend a Free Webinar
We make an effort to provide educational opportunities through webinars that we offer on an ongoing basis. You can learn a lot if you join us for one of these sessions, and there is no admission charge, so this is a great opportunity to build on your knowledge.
The upcoming dates are posted on our webinar page. When you identify the session you would like to attend, follow the simple instructions so we can reserve your spot.
Schedule a Remote Consultation!
If you are ready to have a meaningful discussion with a licensed Staten Island estate planning attorney, we are here to help.
When you choose our firm, we will gain an understanding of your objectives and your family dynamic and make recommendations. At the end of the process, you will go forward with a custom crafted plan that ideally suits your needs.
You can set the wheels in motion right now if you give us a call at 332-456-0500, and you can fill out our contact form if you would prefer to send us a message.
Neil has chosen to work with people that have the system stacked against them and need a strong and relentless advocate that has the knowledge and passion to ensure that they acquire the justice they deserve. He chose to become a lawyer so that he could fight for those who may not be able to stand up on their own to those who have harmed them. This sense of service and justice is why Neil fights for people who have had their lives turned upside down by outside people and companies and those victims deserve justice and a sense of safety and protection in this world.
- Five Things to Know About Nursing Home Care - July 27, 2021
- Roth IRAs Can Be a Great Planning Strategy: Basics - July 22, 2021
- Avoid These Four Estate Planning Mistakes - July 20, 2021
