If you have a family member with disabilities who relies on Medicaid and/or SSI, giving them money either as a gift during your lifetime or at death as an inheritance, may affect their government benefits, either reducing the benefit or causing them to lose the benefit until they spend the funds they received. If you want to make a gift to this family member or leave them an inheritance, you should consider a special needs trust as a mechanism for doing so. When considering special needs trusts, it is important to understand the two different types and when each should be used and how they are structured.
Two Types of Special Needs Trust
A first-party special needs trust is a trust that is established by the beneficiary (disabled person) and funded by the beneficiary. A first-party special needs trust must include a provision that Medicaid is paid back when the person dies. After Medicaid is paid back the amount owed, the balance of the assets in the trust are disbursed to family members or others per the trust terms.
The other type ofspecial needs trust is a third-party special needs trust. A third-party special needs trust is established and funded by someone other than the beneficiary. A third-party special needs trust is not required to have a pay-back clause to reimburse Medicaid. For example, if a parent wants to give assets to a disabled adult child, the parent would create the trust and name a trustee. The adult child would be a beneficiary. Since the child doesn’t have control over the assets and the assets in the trust were not the child’s assets, the trust doesn’t interfere with government benefits. And, when the trust is closed, or the beneficiary dies, the assets in the trust are distributed via the provisions you included without any payment made to Medicaid.
If you have a loved one in your life that is on government benefits that includes income and asset restrictions, contact Grissom Law, LLC to discuss creating an estate plan that includes a special needs trust to benefit your loved one.
Disclaimer
This Blog/Web Site is made available for educational purposes only as well as to give you general information and a general understanding of the law, not to provide legal advice. By using this blog site you understand that there is no attorney client relationship between you and Grissom Law, LLC.