As Long Island Medicaid attorneys, we assist clients that face somewhat complicated situations. One of them is the matter of giving a gift or leaving an inheritance to someone with special needs that is relying on Medicaid as a source of health care insurance.
This is an inherently challenging circumstance, because the Medicaid program is only available to people that can prove that they have very limited resources. We should point out the fact that Supplemental Security Income is another need-based government program that many people with special needs are enrolled in. As the name would indicate, it provides a modest amount of financial support each month.
Supplemental Needs Trusts
If you would like to pass along resources to someone that has special needs, while you are alive or after you are gone, you could establish a supplemental needs trust. This legal device is often referred to as a special needs trust. Any trust is going to have a trustee to act as the administrator, and the beneficiary will receive distributions or other considerations depending on the nature of the trust.
You can act as the trustee if you are establishing the trust to provide for someone while you are living, but you can empower any adult that is willing to assume the role. It is also possible to utilize a professional fiduciary such as a bank trust department or a trust company.
Medicaid pays for covered treatments, and they are rather expansive. This being stated, the program does not pay for certain specialists, elective surgery, some dental procedures, and other medical expenses that can be incurred. When a special needs trust has been established, the trustee can use assets that have been conveyed into it to satisfy these medical needs without jeopardizing Medicaid eligibility.
These are not the only types of expenses that can be paid with assets in the trust. A wide range of different products and services can be purchased by the trustee to make the beneficiary more comfortable. Exercise equipment, electronics, musical instruments, furniture and other household items, appliances, and many other items can be obtained by the trustee. Assets in the trust can also be used to pay for vacations, transportation, school tuition, and home service providers.
If you were to establish a special needs trust for the benefit of a loved one, it would be looked upon as a third party supplemental needs trust. There is an estate recovery provision in the guidelines. This allows Medicaid to seek reimbursement from assets that remain in the estate after the death of a benefit recipient.
When there is a third party special needs trust in place, the assets were never really owned by the beneficiary. As a result, technically, they would not be part of the estate. Medicaid would have no access to any resources that remain in the trust after the death of the beneficiary. A successor beneficiary that is named in the trust declaration would assume ownership of the resources.
Self-Settled Special Needs Trusts
Sometimes an individual with a disability that is eligible for Medicaid and Supplemental Security Income will come into money. This scenario could unfold if a person is disabled because of injuries sustained in an accident that was someone else’s fault. The benefit recipient may receive a sizable personal injury settlement, and this can cause a loss of eligibility.
Under these circumstances, a parent, a grandparent, a guardian, or a court could use the assets to establish a special needs trust for the benefit of the disabled individual. This would be a first party or self-settled special needs trust. Everything would be the same with regard to the ability of the trustee to use assets in the trust to satisfy the supplemental needs of the beneficiary.
However, things are different when it comes to estate recovery. Medicaid would be able to attach assets that remain in the first party special needs trust. This is why you would not want to give assets to a loved one with special needs and subsequently establish a first party supplemental needs trust.
Attend a Free Estate Planning Seminar!
We are holding a series of estate planning seminars in the near future. You should definitely attend the session that fits into your schedule, because we share a great deal of useful information at our seminars. There is no admission charge, but we do ask that you register in advance so that we can reserve your seat. Do just that, visit this page: Long Island Estate Planning Seminars.