There are different asset transfer methods that can be utilized, and the right way to provide for one loved one may not be appropriate for the next. This definitely enters the picture when it comes to an inheritance that you want to leave to a family member with a disability.
Government Benefit Eligibility
A significant percentage of people with disabilities cannot work, so employer-provided health care insurance is not an option. Fortunately, there is a safety net in the form of the Medi-Cal program.
People with disabilities that qualify for Medi-Cal as a source of health care coverage can also receive Supplemental Security Income (SSI). As the name would indicate, this is a source of monthly income for people that have limited earning capabilities.
These are need-based benefits, so you cannot qualify if you have more than $2,000 in countable assets in your name. Once eligibility has been granted, it is not necessarily permanent.
An improvement in financial status can change the dynamic, and this is why you should implement a measured strategy if you have someone with a disability on your inheritance list.
Supplemental Needs Trust
A supplemental needs trust can provide the ideal solution if you are in this position. You will alternately see these trusts referred to as special needs trusts, and the terms are used interchangeably.
To implement this strategy, you fund the trust, and you designate a trustee to act as the administrator. It can be someone that you are personally acquainted with, or you can use a professional fiduciary that provides trustee services.
The beneficiary would not be able to directly access assets that have been conveyed into the trust, and this is the key from a legal perspective. Assets in the trust can be used by the trustee to make the beneficiary more comfortable in many different ways.
They can use the assets to purchase a specially equipped van, vacations with or without a paid companion, leisure and recreational activities and equipment, musical instruments, computers, etc.
Generally speaking, the only types of expenditures that are not allowed are those that are related to food and shelter. However, food and shelter payments result in a penalty that will reduce the SSI benefit; they do not cause a loss benefits.
Plus, the shelter payment guidelines apply to rent and mortgage payments, but the trust could purchase a home for the beneficiary to live in outright. It should be noted that a home is not considered to be a countable asset for Medi-Cal eligibility purposes.
Estate Recovery
The Medi-Cal program is required to seek reimbursement from the estates of deceased beneficiaries. This is called the estate recovery mandate, but in most cases, there is nothing for them to take because you cannot qualify if you have more than $2,000 in countable assets.
As we have stated, a home is not a countable asset, so this is an exception. Plus, the dynamic is completely different when a special needs trust has been established because there may be a remainder after the death of the beneficiary.
If the funding is coming from a third-party initially, Medi-Cal would not be able to reach a home or any other assets that are held by the trust. A successor beneficiary that is named in the trust declaration would inherit the resources.
It is possible for someone with a disability to use their own personal funds to establish a first party or self-settled supplemental needs trust. Under these circumstances, Medi-Cal would attach the trust’s assets after the death of the beneficiary.
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