As Elder Law Attorneys, we focus on Medicaid planning for our clients in order to have access to long-term care. It is equally as important to ensure that their beneficiaries will have access to government programs and not be disqualified by the fact that they received an inheritance.
If you have a disabled child who is already receiving means-based government benefits, such as Medicaid or Social Security Supplemental Income, it is imperative that your estate planning documents leave that child’s share in a Supplemental Needs Trust (also called a Special Needs Trust). When assets are left to a disabled person in a Supplemental Needs Trust, they are not counted as available resources for the purpose of government benefit eligibility. Unlike Medicaid planning for oneself, there is no lookback period when assets are left from the outset in Special Needs Trust; they are immediately protected.
Even though the assets are left in a trust for your child, that does not mean that the money cannot be used for his or her benefit. Quite the contrary. The Trustee of a Supplemental Needs Trust has a fiduciary duty to use the funds for the benefit of the disabled person in a way that would enhance his or her life and supplement any needs that are not being met by government benefits. There is no restriction on how much money can be spent on the disabled individual.
A key difference between Supplemental Needs Trusts created for the benefit of someone else (known as a third party trust) and a trust created by the disabled person for their own benefit (first party trust) is that when created by a third party, any assets remaining in the trust at the disabled person’s death does not need to be paid back to Medicaid. Rather, the creator of the trust can designate remainder beneficiaries who will inherit what is left in the trust. First-Party Special Supplemental Needs Trusts require a payback to Medicaid for benefits paid during the disabled person’s lifetime, often leaving little or nothing for their remainder beneficiaries.
It is important to note that a trigger Special Needs Trust can be put into your Trust or Will to provide protection not only for known disabled beneficiaries, but for all beneficiaries. This ensures that even a beneficiary who was not disabled at the time you prepared your estate plan, but later becomes disabled, is protected as the terms of the trust would be “triggered” at the time of your death. This is one of the most common updates we make to outdated documents.
While Special Needs planning is of particular importance to a person who has a disabled beneficiary, it is something that should be considered in any estate plan. By taking steps to plan ahead, you can feel assured that your assets will be available to your intended beneficiaries without disrupting their benefits.
– Kimberly Trueman, Esq. and Nancy Burner, Esq.