People sometimes think that an estate plan is something that is universally applicable. You simply decide who gets what, you create a last will, and you are finished.
This type of thinking is common, but it often results in unintended negative consequences. In fact, estate planning should be viewed as a personalized endeavor. Every family is different, and your estate plan should be custom crafted to suit your needs.
There is no better example than the situation that exists when you have a loved one with a disability on your inheritance list. People who have disabilities are clearly going to need health insurance, but a significant percentage of these individuals cannot work.
Since they cannot work, they have no health insurance through employers, and they also have very limited financial resources. For these individuals, Medicaid can provide a much needed solution.
Medicaid is a government health insurance program, and it is relied upon by many people with disabilities.
Because the program is a need-based program, you have to be able to prove that you have a significant level of financial need if you want to gain eligibility. If you are deemed eligible, your eligibility would not necessarily be permanent. It could be forfeited if you were to come into some money.
You could be forced to pay for your medical expenses out of your own pocket until you had virtually nothing left.
There is another need-based government program that many people with disabilities rely upon called Supplemental Security Income. As the name would indicate, SSI provides monthly income for people with special needs who cannot earn income on their own.
Once again, eligibility for this program is not permanently etched in stone. An improvement in financial status could result in a loss of benefits.
Supplemental Needs Trusts
Now that we have provided the necessary background information, we can look at the value of supplemental needs trusts. These trusts are alternately referred to as special needs trusts.
If you wanted to help out someone with special needs without jeopardizing government benefits, you could make this person the beneficiary of a supplemental needs trust. Since you would be the person providing the funding, it would be a third-party supplemental needs trust.
There are also first-party or self-settled supplemental needs trusts. The funding for this type of trust would come from assets that are the property of the beneficiary.
When you create a supplemental needs trust for the benefit of a loved one, you set forth terms in the trust declaration. In this declaration you name a trustee to administer the trust.
The trustee that you name in the declaration can use assets that have been conveyed into the trust to pay for certain things that improve the quality of life of the beneficiary. The rules are complex, so you must name a trustee who understands how to administer a supplemental needs trust.
However, as long as the expenditures are used to satisfy certain approved needs, ongoing eligibility for Medicaid and Supplement Security Income would not be impacted.
We should emphasize the fact that the trustee must be the controller of the assets in the trust. The beneficiary cannot have direct access to funds.
When a third party supplemental needs trust has been established, the Medicaid program would not seek reimbursement from the estate of the beneficiary after his or her passing. On the other hand, the program would seek reimbursement if a first-party supplemental needs trust was established.
Attend a Free Seminar
As you can see from this blog post, there are solutions that can be implemented to address very specific estate planning circumstances. The typical layperson is not going to understand all of the options that are out there, and this is why education is so important.
We do everything possible to raise awareness and provide answers to questions in a number of different ways. Our website provides a good bit of written information, but we also take things a step further.
During the upcoming months, we will be holding a number of different estate planning seminars at various convenient locations here in the Naples/Fort Myers area. You can learn a great deal if you attend the information session that fits into your schedule, and we do offer seminars with various different starting times to accommodate everyone.
This no charge to attend our seminars, but we do ask that you register in advance, because they fill up fast. Visit this page to see the current schedule: Naples FL Estate Planning Seminars.