Preserving special needs benefits can be tricky, but following these steps as laid out by our estate planning attorney S.J. Khalsa will help you understand what you need to do.
It is important to stop and consider the life situation of each person that is on your inheritance list. The ideal way to provide for one individual may not be right for another for a variety of different reasons. In this post, we will look at this dynamic as it applies to people with disabilities.
Medicaid and Supplemental Security Income
Supplemental Security Income (SSI) is a monthly cash stream for people with disabilities that have no earning power because of their limitations. Medicaid is a jointly administered federal/state operated government health insurance program that is also available to people with a significant level of financial need.
These benefits are extremely important to the folks that qualify for them. Once eligibility has been granted, it is not permanently etched in stone. An improvement in financial status can trigger a loss of benefits. This is why you should take pause before you leave an inheritance to a person with a disability.
Preserving Special Needs Benefits: Supplemental Needs Trusts
Fortunately, there is a viable solution if you want to provide resources for someone with a disability in the form of a supplemental needs trust. These trusts are sometimes referred to as special needs trusts.
Medicaid does not pay for every type of medical service, and Supplemental Security Income payouts are very modest. Under the rules of these benefits programs, the trustee of a supplemental needs trust could use assets in the trust to satisfy unmet needs.
In this context, the term “needs” is not strictly applied to hand to mouth necessities. A wide range of different expenditures would be approved. These would include medical assistance that is not covered by Medicaid, vacations, transportation costs, household items, services of certain types, school tuition, and on and on.
When it comes to the choice of a trustee, you could name someone that you know, or you could use a professional such as a trust company or the trust department of a bank. This can be a good choice because a fully qualified fiduciary can be relied upon to manage assets in the trust effectively.
Medicaid Estate Recovery
Sometimes a person with a disability will come into money for some reason. A common situation would be an individual that was injured in an accident ultimately receiving a settlement or judgment.
Under these circumstances, the person in question could establish a supplemental needs trust with their own funds. Everything would be the same with regard to the ability of the trustee to use the funds to make the beneficiary more comfortable.
However, there is one major negative. Medicaid is required to seek reimbursement from the estates of people that were enrolled in the program during their lives. Assets that remain in a first party or self-settled special needs trust would be available to Medicaid after the death of the grantor/beneficiary.
If you establish a supplemental needs trust for the benefit of someone else with your resources, it would be a third-party trust. In the trust declaration, you would name a beneficiary to succeed the first beneficiary. After your death, the successor would actively assume the role, and Medicaid would not be able to touch the funds.
Attend a Free Webinar
We are going to be holding a series of webinars in the near future that will cover a number of different important elder law and estate planning topics. You can learn a lot if you attend one of these sessions, and you can obtain all of this great information in the comfort of your own home.
To get all the details, visit our webinar schedule page and follow the simple instructions to make sure that you are filled in whenever we add new dates. If we do not have any live webinars scheduled, please watch our on-demand webinar to learn why preserving special needs benefits is important and what steps you should take.
Schedule a Consultation
Once you have watched our webinar, please feel free to reach out to inquire about a consultation with our team. Our doors are open if you are ready to work with our Manhattan, New York estate planning attorney to create a solid plan that is ideal for you and your family. You can send us a message to request a consultation appointment, and we can be reached by phone at 212-973-0100.
While he was in law school, he worked as an aide to the late John Sparkman, Senior Senator from Alabama. This gave him the opportunity to gain intimate knowledge of the workings of government, and this background has served him well.
He started his private practice in New York in 1974, the first Sikh to be admitted to the bar in the state of New York.And in 1995, when he narrowed his legal focus to the areas of estate planning and elder law, the prestigious American Academy of Estate Planning Attorneys accepted him into their membership.
Special needs planning is an important aspect of the field, and Mr. Khalsa has intertwined his empathy with his expertise to become a leading advocate in this area. Shortly after the Education for All Handicapped Children Act was enacted in 1975, he won the first case in New York that was adjudicated under this law.
S.J. Khalsa has a penchant for philanthropy, and he has raised well over $20 million for charities nationwide. He is a deeply spiritual man who represents the Sikh religion at religious and interfaith gatherings all over the globe.
He believes that successful professionals should contribute to the fabric of their communities, and to this end, he works with law enforcement in New York.
Mr. Khalsa is a graduate of the FBI Citizens Academy program, and he is active in their Alumni Association. He is a member of the FBI/New York Police Department Joint Task Forces on Civil Rights and Hate Crimes, and he sits on the Community Engagement Council that advises the FBI Assistant Director for New York.
He is the author of the highly acclaimed book, Estate Planning Essentials: A Guidebook for Modern Families. Lawyers of Distinction recognized him for his excellence in 2020, naming him a 2020 Power Lawyer, and he is a member of the prestigious American Academy of Estate Planning Attorneys.
Mr. Khalsa lives in Manhattan with his wife, and he has two grown children and four grandchildren. He likes to travel, and he is an avid golfer. As the co-owner of Kundalini Yoga East in New York along with his wife, he instructs practitioners and aspiring yoga teachers.
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