What can a Special Needs trust provide?
Most Americans receive health insurance from their employers. Many people with special needs are not able to enter the workforce. This is why this option is not available. They definitely need health insurance, and fortunately, there is a safety net in the form of Medicaid.
This is a need-based program. Medicaid is not available to people with more than $2,000 worth of assets. Supplemental Security Income (SSI) is another government benefit that provides income for people with disabilities that cannot work.
Inheritance Planning Implications
Since these benefits are only available to people with limited financial resources, how can you leave an inheritance to someone who is relying on them?
There is an advanced estate planning approach that can be taken under these circumstances. You could convey assets into a special needs trust to help someone with a disability without impacting their benefit eligibility.
Approved Expenditures
Now that we have provided the necessary background information, we can address the question that serves as the title of this post. When you create a special needs fund, you will name a trustee who will act as the administrator. The person you want to help out would be the beneficiary.
The trustee can be someone that you know personally. This person will have the time to do the job and the financial knowledge. There is an alternative if you don’t have a suitable person. Professional fiduciaries offer trustee services at a fee. This can be the right choice under some circumstances.
Technically, the government benefits are supposed to cover necessities like food, shelter, and clothing. The maximum SSI payment for 2024 will be $943 per month. This is not a lot of money. The trustee can provide a wide range of goods and services without breaking any rules. Here is a partial list:
Motor vehicle with or without modifications
Vacations
- Computers and other electronic equipment
- Training and tuition
- Healthcare-related treatments not covered by Medicaid
- Transportation
- Paid companionship
- Appliances and household items
- Insurance and final expenses
- First Party vs. Third Party Special Needs Trust
- If a person with a disability comes into money after they are receiving these benefits, the resources can be used to fund a first party or self-settled special needs trust. The details would be the same with regard to the trustee’s ability to make the beneficiary more comfortable.
However, there is the matter of Medicaid estate recovery. The program is required to seek reimbursement from the estates of beneficiaries after they pass away.
Assets that remain in a first party special needs trust would be available when Medicaid is seeking reimbursement.
The remainder that is left in a third-party trust that is funded by someone other than the beneficiary would be protected during the Medicaid recovery phase. A successor beneficiary would be named in the trust declaration, and they would become the active beneficiary.
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You reached this site because you are looking for information about estate planning and elder care, and we have some fantastic opportunities coming up in the near future. Attending one of our seminars will help you learn a great deal. Larry Parman is an attorney at law who has been practicing for over 30 years. He is a member of the Oklahoma State Bar Association.
