You should understand all of your options and make the right choices when you are planning your estate. If you take action without all of the necessary information, you could make honest mistakes that yield unintended consequences. With this in mind, we will look at special needs trusts in this post.
Life Situation
It is important to evaluate the life situation of each person on your inheritance list. There are many different tools that can be used to get assets from point A to point B, and you should provide for each loved one on your inheritance list in the optimal manner.
A person with a disability may well be in a very unique life situation. Many people with disabilities require care and treatment that can cost millions of dollars over the course of a lifetime. For these people, health insurance is essential, and Medicaid is often the solution.
This is a jointly run federal/state government program that is in place to provide a health care insurance safety net for people with very limited resources. You do not necessarily have to be disabled to qualify for Medicaid, but a significant percentage of people with special needs do rely on the program.
Because Medicaid is intended for people with a significant level of financial need, there is a limit on countable assets of just $2000. If you were to give a gift or an inheritance to a person who is enrolled in the Medicaid program, the change in financial status could have a negative impact. Eligibility for ongoing Medicaid coverage could be jeopardized.
Supplemental Security Income is another government program that many people with disabilities depend on for income, and this is also a need-based program. An improvement in financial status could result in a loss of eligibility.
You could create a third party special needs trust to provide resources for the benefit of a loved one without impacting ongoing government benefit eligibility. The trustee would be empowered to use the trust’s assets to pay for certain goods and services that are not being provided. These expenditures would be allowed under program regulations.
After the death of the beneficiary, his or her estate would not be targeted by Medicaid for reimbursement.
First Party Special Needs Trust
A first party special needs trust is funded with assets that are the property of the disabled beneficiary who is enrolled in the benefit programs. Things are the same with regard to the trustee’s ability to use the assets to satisfy certain supplemental needs without jeopardizing benefit eligibility.
However, the estate of the beneficiary would be subject to Medicaid reimbursement efforts.
Special Needs Planning Report
If you would like to obtain more in-depth information about special needs trusts, download our free report. This comprehensive resource will answer all of your questions, and you can visit this page to access your copy: Grand Forks ND Special Needs Planning.
- What Might Be Missing from Your Estate Plan? - March 7, 2023
- Estate Planning in 10 Steps - February 9, 2023
- What Estate of Marion Levine Means for Life Insurance - February 7, 2023
