There are various different ways that you can set aside assets for the benefit of a loved one. The right choice will depend upon the circumstances, and with this in mind, we will look at third party special needs trusts in this post.
Improved Quality of Life
A third party special needs trust is a trust that is funded by someone other than the beneficiary. This type of trust can be used to provide for a loved one who has a disability.
Many people who have special needs are enrolled in the Medicaid program. This is a health insurance program that is jointly administered by the federal government along with the state government.
Medicaid is not available to everyone. To qualify, you must be able to prove that you have very limited financial resources. The parameters are quite modest, so any improvement in financial status could jeopardize benefit eligibility.
If you wanted to give a gift to a loved one who is enrolled in the Medicaid program, you could be doing more harm than good on one level, because benefit eligibility could be lost. The same thing is true of an inheritance. A direct inheritance could impact ongoing benefit eligibility.
In addition to Medicaid, a significant percentage of people with special needs are enrolled in the Supplemental Security Income program. This is also a need-based program, and it provides income for people who can qualify.
The same situation applies to Supplemental Security Income with regard to an improvement in financial status.
When a third party special needs trust is in place, the trustee handles the trust administration tasks. The beneficiary cannot make direct decisions with regard to the actions of the trust, and the beneficiary cannot handle the assets.
The government benefits do not cover 100 percent of everything that the beneficiary may need. These unmet needs are referred to as supplemental needs.
The supplemental needs of the beneficiary can be satisfied by the trustee through the utilization of assets that have been conveyed into the trust. Ongoing benefit eligibility would not be impacted, as long as the trustee is using the assets for approved purposes.
When this type of trust has been established, the Medicaid program does not seek reimbursement from the estate of the beneficiary after his or her passing.
Free Report
We have prepared an informative report that looks at special needs planning as it applies to children. If you would like to learn more about the subject, download your copy of the report.
Our report is being offered to our readers on a complimentary basis at the present time, so this is a great opportunity to obtain some free information.
To obtain access, click this link and follow the simple instructions: Indianapolis IN Special Needs Planning.
Paul A. Kraft, Estate Planning Attorney
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.
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