Do you have a disabled child (under 65) who is receiving government benefits, such as Medicare or Medicaid? If so, you need to know about some important scenario’s that could affect your child’s government benefit eligibility.

In your will, have you named your disabled child as a beneficiary of certain items?  If so, upon your death, you may have just made your child ineligible for government benefits such as Medicaid, as he may no longer meet the financial criteria.   What if someone else names your child as the beneficiary of their will or gives them an extravagant gift if money? That is right, someone else has made your child Medicaid ineligible.

What if your child was involved in a terrible car crash or medical malpractice situation and he or she was to receive a settlement check after they had already been on Medicaid for several months? You guessed it, your child would no longer be eligible for Medicaid.

Without a special needs or supplemental needs trust in these situations, your child will become ineligible for Medicaid, have to “self-pay” the nursing home out of pocket from the money they just received, and go through the whole Medicaid process again once the nursing home, hospital, doctors, and government have taken all of their newly acquired money.  In reality, the money coming to the disabled individual is just going straight in the government’s pocket.

With special planning, these situations can be remedied.

A Special Needs Trust, also called a (d)(4)(a) trust, is setup with the disabled person’s assets by the disabled individual’s parent, grandparent, guardian, or court, and is designed to take the disabled individual’s incoming assets (such as a settlement check or retirement account) into the trust before it goes to the individual. No other person may put assets into this trust besides the disabled individual.  The money can be used for the special needs of the individual (luxuries and care) above and beyond what government benefits provide for such as: Medical and dental expenses beyond what third parties pay for; Clothing; Electronic Equipment (such as radio, recording and playback, television and computer equipment); Programs of training; Education; Treatment and rehabilitation; Transportation (including vehicle purchases); Vacations; Participation in hobbies; Companionship; and so forth. In the eyes of the government, the money is not considered to belong to the individual.  Upon death, any remaining money will first payback the government for the amount of benefits they provided, then the rest of the money goes to anyone the parent, grandparent, court, or guardian designates.

A Supplemental Needs Trust, also called a Third Party Trust, is set up with assets other than the disabled person’s.  It can be set up by anyone, except the disabled individual, and anyone can add items to this trust except the disabled individual.  These types of trusts are designed for times when you would like to name the disabled child as a beneficiary of a will.  They may be used for the same luxuries and care items as set forth above, but at death, the money goes straight to the remainder beneficiaries that the third party named, instead of going to the government.

There are several types of trusts for a disabled person and each is designed to meet a different goal.  While this article only outlines two types of trusts, each trust is complex should not be attempted without experienced legal advice.  Please call or office if we can assist you.  You will need the help of a qualified elder law professional to help you identify your options.