People with special needs are typically enrolled in the Medicaid program. This is a government health insurance program that is administered by each state government along with the federal government. We practice law in the state of California, and in our state, the program is called Medi-Cal.
Clearly, health insurance is going to be particularly important for people with special needs. In some cases, care and treatment can cost millions of dollars over the course of a lifetime.
Medi-Cal is a need-based program that is only available to people who have very limited financial resources. Many individuals with disabilities are unable to work, so these folks do in fact have financial limitations, and they can qualify for Medi-Cal coverage.
There is another government program that many people rely upon called Supplemental Security Income. The name of the program explains its purpose: SSI provides a source of income for disabled people who are unable to earn much on their own.
If a benefit recipient was to come into some money, his or her financial status could change, and eligibility for need-based government benefits could be forfeited. To account for this, special needs trusts are often created. These trusts are alternately referred to as supplemental needs trusts.
First Party Special Needs Trusts
A first party special needs trust would be a special needs trust that is funded with the beneficiary’s own assets. For example, if someone was to become disabled due to injuries sustained in an automobile accident, the victim may receive a settlement. The settlement proceeds could be used to fund a first party special needs trust.
In many cases, an expensive court proceeding is required to establish a first party special needs trust. A better option is to create a third party special needs trust which does not require court proceedings but does require advanced planning to properly implement one.
When the trust declaration is being created, a trustee is named. Benefit eligibility is not jeopardized if the trustee uses the assets in the trust to satisfy the supplemental needs of the beneficiary.
There is a serious drawback that comes into play. When a first party special needs trust has been created, the Medicaid program would seek reimbursement from the estate of the beneficiary after his or her passing.
Free Report on Special Needs Planning
We are committed to education, and to this end, we have created an electronic library of in-depth special reports that cover numerous different estate planning and elder law topics. These reports are free, and we have a report that is dedicated special needs planning.
If you would like to obtain access to a copy of the report, visit the Reports section of our website.
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We would be glad to assist you if you would like to discuss special needs planning with a licensed attorney. To request aconsultation, please contact our office.
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