When you are planning your estate, you should carefully consider the life situation of each of your beneficiaries. The method of transfer to one beneficiary may not be appropriate for another.
When it comes to providing for a person with special needs, you must take benefit eligibility into consideration.
A significant percentage of people with disabilities rely on Medicaid as a source of health insurance. This is a need-based benefit that is only available to individuals with very limited financial resources.
Clearly, a loss of eligibility would be truly devastating and extremely costly. A windfall of money could result in a period of ineligibility.
Supplemental Security Income (SSI) is a government program that is somewhat self-explanatory. People with very limited earning power can receive a modest stream of income through the SSI program.
Once again, this is a need-based benefit, so an improvement in financial status could trigger a loss of the benefit.
Supplemental Needs Trust
A special needs or supplemental needs trust is a great solution if you have a loved one with special needs. When you pass away, your loved one will receive the benefit of his/her inheritance through the supplemental needs trust.
Government benefits do not satisfy all of the needs of the recipient. Under the rules of these programs, the trustee of a supplemental needs trust may use assets in the trust to purchase goods and services that make the beneficiary more comfortable. These include specially-equipped vehicles, electronics, training, education, vacations with or without a companion, and medical and dental procedures not covered by Medicaid.
As long as all rules are followed, eligibility for Medicaid and SSI is not impacted.
Medicaid Estate Recovery
Now that we have set the stage properly, we can get to the matter of estate recovery.
When a Medicaid recipient dies, the program is required to seek reimbursement from the person’s estate.
If you establish a supplemental needs trust for a loved one relying on Medicaid, assets that remain in the trust after the beneficiary’s death are protected. Medicaid is not able to touch them, and they may be transferred to a successor beneficiary you choose.
A supplemental needs trust may also be established when a person with special needs owns their own assets. This is called a first party or self-settled special needs trust.
The situation is the same with regard to the trustee’s ability to use assets in the trust to satisfy the supplemental needs of the beneficiary. However, with a first party special needs trust, Medicaid may recover assets from the trust after the beneficiary passes away. For this reason, it not advisable to give a direct gift to a loved one in order to establish a first party special needs trust.
Download Our Free Worksheet
We have carefully prepared a worksheet for your review to gain a more thorough understanding of the estate planning process. This valuable tool is being offered free of charge right now, and we encourage you to read it.
To get your copy, visit this page and follow the simple instructions: Free Estate Planning Worksheet.
Schedule a Consultation Right Now!
Written resources are great, and there are plenty here on this website. However, at some point, it is time to work with an Oklahoma City estate planning lawyer to put a plan in place.
If that time is now, you can give us a call at 405-843-6100 to set up a consultation, and you can fill out our contact form to request an appointment electronically.
Since founding Parman & Easterday in 1985, Larry has led over 1,000 free, community-service education programs and helped more than 10,000 Oklahoma families go from putting off their estate plan to getting it done. His goal for every client is the same: to become the person their family calls "the one who took care of everything."
Larry is the author of three books: The Straight Shooter's Guide to Estate Planning; Estate Planning Basics; and Guiding Those Left Behind in Oklahoma. He served as Oklahoma's Secretary of State and Secretary of Commerce, and his firm is the only member of the American Academy of Estate Planning Attorneys in the state.
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