The process of estate planning involves pointed asset transfers to numerous different people in many cases. Each person that you love is special, and you should take a long look at the various different life situations of each respective inheritor. The right tool exists for every situation, and you should act in a fully informed manner. With this in mind, we will look at two different types of special needs trusts in this blog post.
Third Party Special Needs Trusts
If you are setting aside assets for the benefit of a loved one who has a disability, you have to be concerned about ongoing eligibility for need-based government benefits. Many people with disabilities are enrolled in the Medicaid program, which is a health insurance program that is only available to people who can prove that they have a significant level of financial need.
Supplemental Security Income can also enter the picture. This program provides an ongoing source of much-needed income for people with disabilities who cannot earn income on their own.
An improvement in financial status could impact benefit eligibility. You have to keep this in mind if you have a person with a disability on your inheritance list, or even if you want to give a gift to someone who is in this situation while you are living.
It would be possible to enhance a loved one’s quality of life without jeopardizing government benefit eligibility if you were to make the person in question the beneficiary of a third party special needs trust. The reason why it is called a third party trust is because the funding is coming from someone other than the beneficiary.
The trustee could use assets in the trust to satisfy certain unmet needs. As long as the expenditures are within the guidelines, benefit eligibility would not be jeopardized. In addition to this, the Medicaid program would not seek reimbursement from the estate of the beneficiary after his or her death.
First Party Special Needs Trusts
A parent, a grandparent, or a legal guardian could use funds that are the property of the beneficiary to create a first party special needs trust. The same situation would be place with regard to the trustee’s ability to use assets in the trust to satisfy certain needs, and benefit eligibility would not be lost.
However, with this type of trust, Medicaid would seek recovery from the beneficiary’s estate.
Special Needs Planning Consultation
Special needs planning can be a delicate and somewhat complicated matter. If you would like to discuss things with a licensed professional, our firm can help.
We offer free consultations, and you can send us a message through our contact page to set up an appointment: Southampton PA Special Needs Planning.
Joe Masiuk, Estate Planning Attorney
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