Before we address the question that serves as the title of this blog post, we should provide some necessary background information on government assistance programs.. Most people with special needs do not have health insurance from jobs, and they do not have the ability to pay for coverage out of their own pockets. As a result, they qualify for Medicaid.
Medicaid or Supplemental Security Income (SSI) are jointly administered federal/state government health insurance programs that are available to people that have a significant level of financial need.
Because it is intended for people with sparse resources, there is an asset limit. In most parts of the country, this limit is just $2000, including here in Nevada. We should point out the fact that some things don’t count towards asset limit, including the Medicaid recipient’s primary residence. A caveat would be that there is a home equity limit, and in Nevada at the time of this writing, it stands at $572,000.
There is another government program that many people with special needs or disabilities qualify for called SSI. Individuals with special needs often have little to no ability to earn money, and this program acts as a source of monthly income. It is quite modest since the maximum payout is $771 per month this year, but it certainly helps.
Special Needs Trusts
In some cases, a person with special needs that is relying on Medicaid and SSI will receive a windfall. It could come from a personal injury settlement, insurance proceeds, a large gift, or an inheritance.
On the surface, it may seem as though the recipient would lose eligibility for these benefits until the resources evaporate. In fact, there is a solution in the form of a special needs or supplemental needs trust. A parent, a grandparent, a guardian, or a court could use the assets to fund a special needs trust. This would be an irrevocable trust, and the beneficiary would not be able to touch the principal.
Medicaid and SSI are not going to cover everything that enrollee may want or need. There are some health care related expenses that are not covered, and clearly, $771 a month is not going to go far. Under program rules, the trustee could utilize assets that have been conveyed into the trust to satisfy the unmet or supplemental needs of the beneficiary. Trust assets would not impact the eligibility status of the benefit recipient.
When the beneficiary’s own money is used to fund the trust, it is called a first party or self-settled supplemental needs trust. After the death of a benefit recipient, Medicaid is required by law to seek reimbursement from the individual’s estate. If a self-settled special needs trust has been established, and there is a remainder after the death of the grantor/beneficiary, the assets could be absorbed by the Medicaid program.
The other type of special needs trust is a “third party” special needs trust. If you go this route, everything is the same with regard to the ability of the trustee to use money in the trust to make the beneficiary more comfortable. However, after their death, the remaining assets would be protected from the Medicaid. They would be passed along to the secondary beneficiary that you name in the trust declaration.
Attend an Upcoming Estate Planning Seminar!
If you would like to learn more about special needs trusts and other important elder law and estate planning topics, we have some fantastic opportunities coming up in the near future. Our Reno inheritance planning attorneys are holding a series of seminars, and you can obtain a treasure trove of knowledge if you attend one of the sessions.
Best of all, there is absolutely no admission charge to deal with, so you get all of this information without reaching into your pocket for a single dime. To see the schedule and obtain registration details, visit our estate planning seminar schedule page.
With a law degree and a Master of Health Administration from the top health law program in the nation Mr. Rader began his career in public service with the Nevada State Board of Medical Examiners. While with the Board he dealt with many complex health care issues confronting the state and assisted in redrawing state health law. Mr. Rader next worked for the Governor’s Office, Consumer Health Assistance. As Deputy Chief Ombudsman he represented the interests of many citizens before health care providers, state legislators and other state agencies.
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