When someone has a disability, they often times receive aid from the state or federal government through Medicaid and the Social Security Administration. While some forms of assistance are not need based, SSDI for example, others are. The most common needs-based aid programs we see are the Supplemental Security Income (SSI) and Medicaid programs.
In short, that means that, among other things, in order to qualify for benefits under these programs the recipient must stay below income and/or asset limits. If the beneficiary of these programs goes over the limit, he or she becomes ineligible for benefits until they meet the required criteria again.
Sometimes a beneficiary cannot help going over the limit. Occasionally social security will issue large checks for back payment etc. However, the most common way in which this becomes an issue is through an inheritance.
If a child on SSI or Medicaid receives an inheritance which puts him or her over the asset threshold, he will get kicked out of the program when that is reported. Failure to report the inheritance can lead to additional penalties down the line. The child then must spend all the inheritance on the care that Medicaid/SSI used to pay for until the funds are gone. When he is broke again, Medicaid and SSI kick back in.
A special needs trust is specifically designed to hold assets that would otherwise go to the child receiving benefits. Specific language is used to ensure that the permissible uses of the funds do not overlap with those to be provided through the government aid programs. The impact of this is that those funds will not disqualify the child from receiving benefits, and the inheritance can be used for things they want. Common uses for funds in these types of trusts include buying clothing, furniture, going on vacation, or buying a vehicle.
While these trusts are most effective when done before the child receives the inheritance, options may still be available even after the money has been received. The main difference we see is whether or not the State has the ability to obtain funds in the Trust after the child eventually passes away.
These types of Trusts can either be managed by a friend or close family member, or a non-profit corporation. A trust operated by one of the non-profit organizations is known as a pooled special needs trust.
A pooled trust is a special needs trust that is set up and administered by a nonprofit organization. This can be done for various reasons, but most commonly when the child does not have a suitable Trustee willing to manage their Trust.
The nonprofit organization creates one large trust and individual disabled beneficiaries have accounts within that trust. This means that the assets of many people with disabilities are “pooled” together. Although the assets of many beneficiaries are invested together, each beneficiary’s account remains his or her own.
In short, it depends on if the money was transferred to the child before going into the Trust. If the child had possession of the funds, then the money is subject to the Medicaid payback provisions. If someone else set up the Trust for the beneficiary and the funds went directly into the trust, then under current law, it is not subject to Medicaid payback.
Any funds left in the account after Medicaid is satisfied (if applicable) can be distributed however the beneficiary says. Keep in mind, however, that some nonprofit organizations may require that a certain percentage of the remaining money be allocated to the nonprofit organization to benefit other people with disabilities.
Our Estate Planning lawyer can help you address any of these issues. Consulting with an experienced estate planning lawyer is essential. It will ensure that your children are taken care of and your final wishes regarding your property, your loved ones, and your final arrangements are carried out.
Not all lawyers are created equal. In difficult times, it is vital to select a lawyer who is well versed in the law and takes the time to find out about your family’s situation in order to prepare a plan that works for you and accomplishes your goals.
Our Estate Planning attorney has the experience you need to address all your questions regarding wills trusts and probate, including estate administration.
We are located 5 minutes from the Portage County courthouse in Ravenna, OH. Our law firm was created in 2000, and our lawyers have been servicing the Portage County community ever since.
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