Our attorneys talk a lot about personalized estate planning, because people and their families are unique. A perfectly acceptable way to transfer assets to one family member may not be appropriate for the next for one reason or another.
There are different ways to proceed, and the correct course of action will depend on the circumstances. This will definitely enter the picture when it comes to leaving an inheritance to someone with a disability.
Health Insurance
The majority of insured Americans that are not senior citizens receive their coverage through their employers. Since a significant percentage of people with disabilities do not work, this is not a possibility for them. At the same time, they definitely need health insurance.
People that are not part of the workforce have limited resources, and in this case, that’s a good thing because they can qualify for Medicaid. It is available to people that have less than $1600 in countable assets, so an improvement in financial status could cause a loss of eligibility.
Supplemental Security Income (SSI)
Supplemental Security Income is another benefit that many people with disabilities receive. The maximum benefit for a single person is $841 this year. Clearly, this is not a lot of money, but every little bit helps. Once again, eligibility is based on financial need.
Supplemental Needs Trust
The implications are clear. If you leave a direct inheritance to someone that is relying on these benefits, their financial profile will change. As a result, they would no longer qualify for these need-based benefits if they maintain personal possession of the property.
When you know all of this in advance because you discussed the matter with an estate planning lawyer, you can respond in the appropriate manner. You could establish a supplemental needs trust, and this type of trust is alternately referred to as a special needs trust.
The beneficiary would not be able to act as the trustee, so you would need someone to manage the trust. It can be an individual that you know personally, or you can use a trust company, the trust department of a bank, or another qualified professional entity.
Assets that you conveyed into the trust would be out of the reach of the beneficiary, and this is part of the plan. The trustee would be able to use the resources to make purchases that enhance the beneficiary’s quality of life in many ways.
Since the beneficiary would not own or control the assets, the existence of the trust would not impact government benefit eligibility. The trustee has broad latitude to use the assets to provide anything except direct payments for food and shelter, so a well-funded trust can have an enormous impact.
Medicaid Estate Recovery
When someone with a disability comes into money for some reason, the assets could be used to fund a supplemental needs trust. The problem with this is the Medicaid estate recovery mandate.
If a first-party supplemental needs trust is in place, the beneficiary would not surrender incidents of ownership. As a result, the remainder that is left in the trust after the death of the grantor/beneficiary could be attached by Medicaid during the recovery phase.
On the other hand, when you use your funds to establish a supplemental needs trust, it is a third-party trust. Under these circumstances, the beneficiary was never involved in the ownership of the assets, so they would go to a successor beneficiary that you designate in the trust declaration.
We Are Here to Help!
You can definitely rely on us to help you establish a plan that will provide for a person with a disability in the ideal manner. And of course, if this is not a source of concern for your family, we can evaluate the situation and make the appropriate recommendations.
If you are ready to get started, you can schedule a consultation at our Westport or Glastonbury, CT estate planning offices if you call us at 860-548-1000, and you can use our contact form to send us a message.
Mr. Lowe was awarded his Juris Doctorate degree and Tax Law Certificate from the University of Connecticut School of Law. After graduation from law school, Mr. Lowe worked as an international corporate tax planning associate with Deloitte Tax LLP.
Mr. Lowe is admitted to practice before all the state courts in the State of Connecticut and is a member of the American Bar Association. He is also a member of the American Academy of Estate Planning Attorneys. In addition, Mr. Lowe is an active member of the Connecticut Bar Association where he is a member of the Estate Planning and Probate Section, the Elder Law Section and the Young Lawyers Section. Mr. Lowe is also a member of Hartford Young Professionals & Entrepreneurs.
Mr. Lowe was selected for Super Lawyers Rising Stars from 2017-2021.