When you are planning your estate you should think long and hard about the way that you will be transferring assets to each person on your inheritance list. It is not necessarily a matter of handing out pieces of a pie through the terms of a last will.
With the above in mind, let’s look at people with disabilities, government benefits, and supplemental needs trusts.
People with disabilities often qualify for need-based benefits like Medicaid and Supplemental Security Income. It can literally cost millions of dollars to provide medical care and treatment for someone with a disability over the course of a lifetime. These benefits are absolutely indispensable for many people who have special needs.
Let’s say that you want to leave an inheritance to someone who is enrolled in these benefit programs. When this person originally qualified, he or she fit a particular financial profile. The applicant did not have countable assets that were in excess of the $2000 asset limit.
The influx of money is going to change this person’s financial status. This can result in a period of ineligibility for government benefits. Basically, the inheritor would have to spend the inheritance paying for care and treatment until the inheritance was exhausted. He or she may then be able to qualify for government assistance once again.
Supplemental Needs Trusts
Now that we have provided the necessary background, we can look at supplemental needs trusts.
If you wanted to provide resources for someone with a disability who is receiving government benefits, you could make this person the beneficiary of a supplemental needs trust. These trusts are sometimes referred to as special needs trusts, but the former description is actually more accurate with regard to function.
The government benefits do not pay for everything that the beneficiary would find to be helpful, useful or comforting. The trustee that you choose when you create the trust agreement can use the assets that have been conveyed into the trust to provide for the supplemental needs of the beneficiary without impacting government benefit eligibility.
These expenditures could be described in a nutshell as things that the government benefits will not cover.
Download Our Free Report
This post provided a very brief, surface explanation of supplemental needs trusts. If you would like to learn about special needs planning in greater detail, especially as it applies to children, we have created a resource that you will find to be useful.
Our firm has developed a series of special reports that cover a number of different estate planning topics. One of these informative reports examines the subject of special needs planning in-depth.
These reports are available to you absolutely free of charge. To download the report, click this link and follow the simple instructions: Special Needs Planning Report.