Many people with disabilities require very expensive care and treatment throughout their lives. The total bills could add up to reach seven figures over the years, so health insurance is essential for these folks.
Medicaid is a government run health insurance program. It is jointly run by the federal government along with each state government, and it exists to provide health insurance for people who have virtually no financial resources.
Because many people with disabilities are not in a position to earn much income, a significant percentage of these individuals qualify for Medicaid coverage.
Impact of Financial Windfall
Eligibility for Medicaid is not necessarily permanent. Since it is a need-based program, the financial need must exist on an ongoing basis. If a person with a disability was to come into a significant amount of money, eligibility for Medicaid could be forfeited.
Sometimes a person with a disability will in fact experience a change in financial status. There are various different ways that this can come about. The individual in question could be the beneficiary of a life insurance policy. There alternately could be an inheritance, or a personal injury or malpractice settlement.
To preserve Medicaid eligibility under these circumstances, a parent or grandparent could create a self-settled special needs trust for the benefit of the benefit recipient. These trusts are sometimes called first party special needs trusts.
Under program rules, the trustee that is engaged to administer the trust can use the assets in the trust for certain purposes that benefit the person with special needs. As long as the guidelines are followed, these expenditures would not jeopardize ongoing eligibility for Medicaid coverage.
We should emphasize the fact that the trustee must handle the assets; the beneficiary does not have direct access.
There is one negative that goes along with the creation of a self-settled special needs trust. After the death of the beneficiary, the Medicaid program would seek reimbursement from his or her estate.
Special Needs Planning Report
There is a lot to digest from a legal standpoint if you have a loved one with special needs who is relying on government benefits. You can obtain a great deal of valuable information if you download our in-depth report on the subject.
This report is free to our readers, and you can click this link to get your copy: Indianapolis IN Special Needs Planning.
Contact Our Firm
If you would like to take things a step further, send us a message through our contact page to request a free consultation: Indianapolis IN Estate Planning Attorneys.
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.