Estate planning is more than just a legal requirement to prevent intestacy; it’s a way to ensure that your loved ones have the support they need. With this in mind, if you have a family member with a disability, one of the most effective tools at your disposal is a supplemental needs trust.
In this blog post, we’ll explore why this type of trust is so advantageous, particularly concerning Medicaid estate recovery.
Understanding a Supplemental Needs Trust
A supplemental needs trust aims to provide financial support to a person with a disability without jeopardizing their eligibility for public assistance programs like Medicaid and Supplemental Security Income (SSI). The trust holds and manages assets for the benefit of the disabled person, with a trustee overseeing fund disbursements.
Keep Vital Government Benefits Intact
A key benefit of a supplemental needs trust is that it allows the beneficiary to keep receiving government benefits. The assets in the trust are not considered the beneficiary’s own, thereby avoiding disqualification from need-based programs like Medicaid or SSI. This is crucial, as these benefits often form the backbone of the individual’s healthcare and general welfare.
Enhance Life Quality With Additional Resources
Government benefits cover the basics, but what about enriching life experiences? A supplemental needs trust can be used to pay for things that improve the beneficiary’s quality of life. This could include specialized medical equipment, educational programs, or even leisure activities.
Ensure Long-Lasting Financial Stability
By setting up a supplemental needs trust, you create a secure financial future for your loved one. Your chosen trustee will ensure that funds are disbursed in accordance with your wishes, making it a long-term solution for their financial well-being.
The Medicaid Estate Recovery Angle
An important point to consider when discussing supplemental needs trusts is their impact on Medicaid estate recovery. Typically, after the death of a Medicaid recipient, the state seeks to recover funds spent on that person’s care. However, a third-party supplemental needs trust provides a shield against this.
Safeguard Remaining Assets for the Next Beneficiary
In a third-party supplemental needs trust, the assets are originally yours, and they were never the property of the disabled beneficiary. That means that upon their death, the remaining assets in the trust are not available for Medicaid estate recovery. These assets can safely transfer to a successor beneficiary.
For instance, if you set up a supplemental needs trust for your disabled daughter, Jane, using your own assets, any funds left in the trust after Jane’s death can pass to another family member or charity without being subject to Medicaid recovery efforts.
Points to Reflect On
While a supplemental needs trust offers numerous benefits, it isn’t without complexities. The trust must be carefully drafted to meet the specific requirements of state and federal laws. Moreover, selecting a trustworthy and capable trustee is essential for the smooth operation of the trust.
Wrapping It Up
The value of a supplemental needs trust in estate planning cannot be overstated. It provides a financial safety net for your disabled loved one without affecting their eligibility for crucial public benefits.
Furthermore, a well-structured third-party supplemental needs trust can protect leftover assets from Medicaid estate recovery, ensuring they go to your chosen successor beneficiary.
Schedule a Consultation Today!
One of the primary reasons to work with a lawyer to put your plan in place is the simple fact that they will explain all of your options to you based on the circumstances. A supplemental needs trust is just one example of the different devices that can be used to satisfy specific objectives.
When you engage our firm, we will make sure that you understand your options so you can make fully informed decisions. At the conclusion of the process, you will go forward with a tailor-made plan that ideally suits your needs.
You can schedule a consultation at our Westport or Glastonbury, Connecticut estate planning offices if you call us at 860-548-1000, and you can use our contact form to send us a message.
Mr. McCann is licensed to practice before the courts of the State of Connecticut. He is a member of the American Academy of Estate Planning Attorneys.
Mr. McCann provides to his clients, trust and estate planning, and trust and estate administration services. Formerly, Mr. McCann was an adjunct professor of economics in the State of Connecticut Community College system, and a Commissioner of the Town of Simsbury Zoning Board of Appeals.