There are different approaches that can be taken when you are planning your estate. The right way to get assets into the hands of one person may not be appropriate for the next. This dynamic will definitely be present if you have a person with a disability in the family.
Government Benefit Eligibility
A very significant percentage of people with disabilities qualify for Medicaid as a source of healthcare insurance. Since it is a need-based program, there is a low asset limit. In most states, it is $2000, but in New York it is $15,900 in 2021.
People with disabilities that qualify for Medicaid can also receive Supplemental Security Income (SSI). Anything helps, but this benefit is very modest. The maximum monthly SSI benefit for an individual in 2021 is $794.
Supplemental Needs Trust
If you want to provide resources for someone with a disability without impacting government benefit eligibility, you could establish and fund a supplemental needs trust. These devices are often referred to as special needs trusts, and the terms are used interchangeably.
You would name a trustee to act as the administrator, and the person that you want to assist would be the beneficiary. The trustee can be someone that you know personally, but many people will use a trust company or the trust department of a bank.
The Supplemental Security Income benefits will not go far, and Medicaid does not cover every medical and dental procedure that an individual may want or need. Under the guidelines that have been established, the trustee would be able to use the assets to satisfy the unmet needs of the beneficiary.
There are few limitations when it comes to the types of goods and services that can be provided. Plus, there are some assets that simply do not count for Medicaid eligibility purposes, including a home, a motor vehicle, household items, and personal effects.
As long as the rules are followed correctly, ongoing eligibility for Medicaid and Supplemental Security Income would not be impacted.
Medicaid Estate Recovery
The Medicaid program is required to seek reimbursement from the estates of people that were enrolled in the program while they were living. If you establish a supplemental needs trust for the benefit of someone else with your funds, it would be a third party trust.
When you are drawing up the trust agreement, you would name a successor beneficiary. After the passing of the first beneficiary, the successor would assume the role, and Medicaid would not be able to attach the assets that remain in the trust.
A person with a disability that is enrolled in these programs that comes into money for some reason could use the funds to establish a first person or self-settled special needs trust. The same rules would apply during the life of the individual in question, but after their passing, the assets in the trust would be available to Medicaid during recovery efforts.
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