There are numerous different ways to provide for your loved ones when you are planning your estate. It is important to gain an understanding of all of your options so that you are proceeding the optimal fashion. It is possible to make mistakes that result in negative consequences, even though you have very positive intentions. With this in mind, we would like to look at the value of special needs trusts.
Medicaid and Supplemental Security Income
You may have a loved one with special needs on your inheritance list. If this is the case, you should carefully consider the impact of a direct inheritance.
Many people with disabilities are enrolled in the Medicaid program. Medicaid is a health insurance program that is jointly administered by the state government along with the federal government. This program is in place to assist people who can demonstrate significant financial need.
Eligibility is not necessarily permanent. A significant change in financial status could interrupt benefit eligibility.
If you were to leave someone with a disability a direct inheritance, his or her Medicaid eligibility could be jeopardized.
Supplemental Security Income is a source of income for many disabled people. This is also a need-based government program. The same situation exists as it applies to Supplemental Security Income. Eligibility could be lost if the person in question was to receive a significant inheritance.
Special Needs Trusts
You could create a special needs trust to improve the quality of life of a loved one with a disability who is enrolled in government benefit programs without jeopardizing benefit eligibility.
The government benefits are not necessarily going to cover all of the needs of the benefit recipient. When you create a special needs trust, you name a trustee. The trustee can use assets that have been conveyed into the trust to satisfy these needs that are not being met by government benefits.
As long as the trustee uses the funds to meet needs that are not being satisfied by the benefits, eligibility is not impacted.
It should be noted that the beneficiary may not control the actions of the special needs trust, and the beneficiary can’t receive direct monetary distributions. The trustee must act to satisfy the supplemental needs of the beneficiary.
If you want to provide for a loved one who is enrolled in government benefit programs, a special needs trust can be a good choice.
Free Report on Special Needs Planning
We make an effort to provide educational opportunities to our readers. To this end we have prepared a series of free special reports that cover numerous estate planning and elder law topics.
One of the reports examines special needs planning as it applies to children. If you would like to access the report, click this link and follow the simple instructions: Special Needs Planning Report.
Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.