There are different ways to facilitate asset transfers after you pass away. In addition to your own preferences, you should consider the respective life situations of the people on your inheritance list when you are making choices. With this in mind, let’s take a look at a very effective special needs planning solution.
Need-Based Government Benefits
Most people that are not yet senior citizens who have health insurance in the United States get it through their jobs. Since a lot of folks with disabilities cannot work, this presents a challenge, and they certainly need coverage to address their medical bills.
Fortunately, the Medicaid program is in place to assist these individuals. It is a need-based health insurance program, and beneficiaries with disabilities typically qualify for Supplemental Security Income (SSI).
Once eligibility has been granted, it is not necessarily permanent. It can be lost if a benefit recipient comes into money for some reason. This is something to take seriously if you will be leaving an inheritance to someone who relies on these benefits.
Supplemental Needs Trust
If you would like to provide for a loved one with a disability in your estate plan, you could establish a supplemental needs trust. These vehicles are sometimes referred to as “special needs trusts,” and the terms can be used interchangeably.
First, you establish and fund the trust, and you name a trustee to administer it. As the grantor, you could also be the trustee, but that doesn’t make sense from an estate planning perspective.
Any mentally competent adult who is willing to assume the role can legally act as a trustee. There are also professional fiduciaries like banks and trust companies that provide trust administration services.
Under the rules of these programs, the trustee can use the assets to satisfy the unmet needs of the beneficiary. Since the beneficiary never actually owned the assets directly, the existence of the trust would not impact benefit eligibility.
Medicaid Estate Recovery
A windfall could cause a loss of benefit eligibility, but there is recourse if a benefit recipient enjoys a significant uptick in their financial profile. The resources could be used to fund a supplemental needs trust.
It would work the same way as a third-party trust that was funded by someone else with one enormous exception. The Medicaid program is required to seek reimbursement from deceased beneficiaries. This is called the Medicaid estate recovery process.
Since you cannot qualify for the benefit if you have significant resources, there is usually nothing for them to attach. However, this dynamic is different when a supplemental needs trust has been established.
If the trust was funded by the beneficiary, the remaining assets would be in play during the recovery phase. On the other hand, if the funding came from a third party, the remaining assets would be protected. They would go to a successor beneficiary that is named in the trust declaration.
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There is no charge to attend our events, but we ask that you register in advance to reserve your spot. To learn more, visit our estate planning events page and follow the instructions if you would like to register.
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Today is the day for action if you’re going through life without an estate plan. You can call us at 405-843-6100 to schedule a consultation appointment at our Oklahoma City estate planning office.
Our Tulsa, OK location can be reached at 918-615-2700, and you can use our contact form if you would like to send us a message.
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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