Estate planning is more than just the slicing up of a pie into pieces of different sizes. There are numerous different ways that you can facilitate asset transfers, and the life situation of each inheritance recipient will be part of the equation.
With the above in mind, we will look at supplemental needs trusts in this blog post.
Unintended Negative Consequences
You may assume that a last will is the estate planning document that you should use to state your final wishes regarding the distribution of your property. If you use a will, the people on your inheritance list will receive direct inheritances.
Under certain circumstances, this could have unintended negative consequences.
For example, many people with disabilities rely on government benefits like Medicaid and Supplemental Security Income. As the name would imply, SSI is a source of income for disabled individuals, and Medicaid provides health insurance.
Everyone with a disability does not automatically qualify for these programs. To become eligible for Medicaid and SSI, you must be able to prove that you have a significant level of financial need.
Once you have been deemed eligible for these benefits, your eligibility status is subject to change. An improved financial situation could result in a loss of benefits.
Think about the impact that a direct inheritance may have on someone who is relying on these need-based government benefits. The windfall could render the inheritor ineligible for SSI and Medicaid coverage.
Supplemental Needs Trusts
To enhance the life of a loved one while simultaneously preserving government benefit eligibility, you could create a supplemental needs trust. These trusts are alternately referred to as special needs trusts.
When you create the trust declaration, you name a trustee to manage the trust. The person that you want to provide for would be the beneficiary.
The beneficiary would not be allowed to directly access resources that you have conveyed into the trust. However, the trustee would be able to use the assets in the trust to pay for certain things that are allowed under program rules.
As long as the trustee works within the guidelines, benefit eligibility would not be jeopardized.
Free Report on Special Needs Planning
Our firm has prepared an in-depth special report that puts the subject of special needs planning under the microscope. You can access your copy through this website, and it is free.
To get your copy of the report, visit this page and follow the simple instructions: Bucks County PA Special Needs Planning.
Schedule a Consultation
We offer free consultations, and we would be glad to assist you if you are interested in creating a supplemental needs trust. To request an appointment, send us a message through our contact page: Southampton PA Estate Planning Attorneys.