A supplemental needs trust, also known as a special needs trust, is a type of trust that can be used to provide resources for the benefit of a loved one with a disability who is enrolled in government benefit programs. We will look at the details in this post.
Medicaid is a jointly administered federal/state government program that provides a health care safety net for low-income people. In California, it goes by the name Medi-Cal. To qualify for Medicaid you must have very limited assets. Clearly, many people with disabilities are not in a position to earn a great deal of income, so they can often qualify for Medicaid coverage.
When you have a disability, you are probably going to need ongoing medical care and treatment, and this can be very expensive. As a result, Medicaid coverage is invaluable for many people with special needs.
Medicaid is going to use your life situation at the time of your application submission to evaluate your eligibility status. Once you have obtained eligibility, it is not necessarily etched in stone forever. A significant change in financial status could jeopardize ongoing eligibility for Medicaid coverage.
What would happen if you leave a direct inheritance to a loved one who is enrolled in the Medicaid program via the terms of a last will? Suddenly, the inheritor’s financial status would change. As a result, benefit eligibility could be lost. Your intentions were good, but the outcome was negative.
Supplemental Needs Trusts
In addition to Medicaid, many people with disabilities also rely upon Supplemental Security Income (SSI). This program is somewhat self-explanatory: it provides an ongoing source of income for people who can’t earn much on their own. It is often confused with Social Security Disability Insurance (SSDI) which is an entitlement program not affected by a windfall, e.g., from an inheritance.
Medicaid and SSI are not necessarily going to cover all of the needs of the benefit recipient. The needs that are not covered are called supplemental needs.
If you were to create a supplemental needs trust, you would name a trustee in the trust agreement. The loved one with special needs would be the beneficiary.
Under program guidelines, assets that have been conveyed into the trust could be used to satisfy the supplemental needs of the beneficiary, and government benefit eligibility would not be impacted.
We should emphasize the fact that the beneficiary cannot direct the actions of the trust or spend the money in a direct fashion. The trustee must use assets that have been conveyed into the trust to meet the supplemental needs of the beneficiary.
Free Report on Special Needs Planning
You have to act in an informed manner if you want to provide assets for a loved one who is enrolled in SSI or Medi-Cal. If you would like to learn more about special needs planning, download our special report.
There is no charge for the report, and you can obtain access through this website. Check out our Reports section.