You have to consider the life situation of every person that is on your inheritance list because an acceptable way to provide for one person will not be right for another. This definitely enters the picture when it comes to leaving an inheritance to a person with a disability.
Government Benefit Eligibility
Most people in the United States who have health insurance get it through their employers, but many Americans with disabilities are not part of the workforce. They can’t get health care insurance through this avenue, and they are not in a position to earn income.
Fortunately, there are government programs in place that will help to fill these gaps. Medi-Cal is a source of health insurance for people with financial need, and Supplemental Security Income (SSI) provides a modest but steady stream of monthly income.
Since there is a $2,000 asset limit, if a beneficiary comes into money due to a lawsuit settlement or some other event, they would lose their eligibility for these benefits.
First-Party Special Needs Trust
There is a solution to this type of situation in the form of a first-party or self-settled special needs trust. These legal devices are alternately referred to as supplemental needs trusts, so you will see both terms utilized.
The person in question (the grantor) could not act as the trustee, but they would be the beneficiary.
A trustee that is named by the grantor or a legal representative would administer the trust. It can be a family member or friend, and there are also professional fiduciaries that provide trustee services.
Medi-Cal does not cover every medical and dental treatment that someone may want or need, and the maximum SSI benefit this year is $914, so it doesn’t go far. Under the rules of these programs, the trustee would be able to use assets in the trust to satisfy the beneficiary’s unmet needs.
There are many different ways that the resources can be utilized to enhance the beneficiary’s quality of life. A home can be purchased along with a specially equipped van, and the trustee can provide vacations, transportation, electronic equipment, and the list goes on and on.
Benefit eligibility would remain intact as long as the trustee follows all the rules correctly.
Medi-Cal Recovery and Third-Party Special Needs Trusts
Though it is possible for a person with a disability to use their own funds to establish a trust, there is a major drawback. After the death of a Medi-Cal recipient, the program is required to seek reimbursement from their estate.
When a self-settled special needs trust has been established, assets that remain in the trust after the death of the grantor/beneficiary would be within reach of Medi-Cal during the recovery phase.
If you want to leave an inheritance to someone that is in this position, you should establish a third-party trust. You would fund the trust with your own resources, and everything would be the same with regard to the trustee’s ability to make the beneficiary more comfortable.
However, there is one major difference. When you establish the trust, you would name a successor beneficiary, and this individual would assume the role after the death of the primary beneficiary. Medi-Cal would not be able to touch the trust’s assets.
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As you can see, there are targeted approaches you can take to address specific estate planning situations. When you work with our firm, we will gain an understanding of your objectives and your family dynamic and help you devise a plan that ideally suits your needs.
You can schedule a consultation at our Burbank, CA estate planning office right now if you give us a call at 818-937-2335, and you can fill out our contact form if you would like to send us a message.
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