There are many different ways to facilitate asset transfers when you are planning your estate. The best way to provide for one person on your list may not be ideal for the next. It is possible to be flexible and create a plan that is tailor-made to suit your specific family dynamic.
With this in mind, we are going to share some information about estate planning for people with disabilities and the value of a special needs trust in these situations.
Need-Based Government Benefits
People with disabilities typically qualify for Medicaid as a source of health insurance. This is a need-based program, so you cannot gain eligibility if you have significant resources.
Individuals that are in this position may also receive Supplemental Security Income. As the name would indicate, this is a source of ongoing income for people who do not have the ability to earn much money in the workforce. Once again, this is a need-based benefit.
A windfall of money could cause a loss of eligibility for these essential benefits. If you will be leaving money to someone who is relying on these programs, this is something to take very seriously.
Special Needs Trust
There is a solution in the form of a special needs trust, and these devices are alternately referred to as supplemental needs trusts. When you create and fund this type of trust, you name a trustee to administer the trust, and the person you want to help would be the beneficiary.
The assets then become the property of the trust; technically, they do not belong to the beneficiary. As a result, the existence of the assets will not impact eligibility for government benefits.
Under program rules, the trustee is allowed to use the assets in the trust to satisfy the supplemental needs of the beneficiary. These are needs that are not met by the government programs, and there are many ways that the funds can be utilized without doing any damage.
Ultimately, the beneficiary will be much more comfortable, and government benefits will remain in place. After the passing of the beneficiary, the successor beneficiary that you name in the trust declaration will receive the remaining funds per your stated instructions.
Medicaid Estate Recovery
The Medicaid program is required by law to seek reimbursement from the estates of deceased beneficiaries. Since you cannot qualify with significant assets, there is usually nothing for them to take.
When a supplemental needs trust has been established, the dynamic is different regarding the remainder that is left in the trust after the passing of the beneficiary. If the trust was funded by someone other than the beneficiary, Medicaid cannot go after the funds.
However, the benefit recipient could use their own funds to establish a special needs trust if they come into money through personal injury case or from some other source.
Under these circumstances, the trustee would have the same latitude to use the funds to enhance the beneficiary’s life. However, the assets that remain in the trust after the death of the beneficiary would be available to Medicaid during the recovery phase.
Attend a Complimentary Educational Event!
We make an effort to provide educational opportunities to members of our community through our special events. You will learn a lot if you attend one of the sessions, and there is no charge, so this is a great way to connect with our firm for the first time.
To see the dates and obtain more information, visit our Estate Planning Events Page.
Need Help Now?
If you are here because you are ready to work with a lawyer to put a plan in place, we can help. You can call us at 860-548-1000 to schedule a consultation at our Glastonbury or Westport, CT estate planning offices, and you can alternately send us a message through our contact page.
Mr. Karpe is licensed to practice law before the courts of the States of Connecticut and Colorado, the U.S. District Court for Connecticut, the U.S.District Court for Colorado, the United States Supreme Court, and the U.S. Tax Court. He is a member of the Connecticut and Hartford County Bar Associations as well as the Estate and Probate Section of the Connecticut Bar Association. In addition, he is a member of the American Academy of Estate Planning Attorneys, the National Academy of Elder Law Attorneys and Planned Lifetime Assistance Network of Connecticut.