Clearly, individuals with special needs are going to require care and treatment throughout their lives, and health insurance is an absolute must for these individuals.
Most people get health insurance coverage through their jobs. Since people with disabilities are unable to work in many instances, this presents an obstacle. For these folks, Medicaid is often the solution. It is called Medi-Cal in California.
Medicaid/Medi-Cal is a government health insurance program that is available to people with very limited financial resources. Because of the need-based nature of the program, you cannot qualify if you have a significant store of countable assets.
Coming into money is just about always going to be a good thing. However, when it comes to Medicaid eligibility, there is an exception to this rule. An improvement in financial status could result in a loss of Medicaid/Medi-Cal eligibility.
Another government program that many people with special needs rely upon is Supplemental Security Income. As the name would suggest, this program provides income for people with disabilities who have little-to-no earning power.
Once again, benefit eligibility could be lost if a recipient was to experience an improvement in financial status.
Special Needs Trusts
Now that we have set the stage, we can look at special needs trusts. When a person with a disability is the beneficiary of a special needs trust, the trustee could use assets that have been conveyed into the trust to pay for certain things that the government benefits are not covering.
As long as the expenditures are within the guidelines, benefit eligibility would not be jeopardized.
There are first party special needs trusts, and there are also third party special needs trusts. A first party special needs trust would be funded with the beneficiary’s own assets. Someone other than the beneficiary would fund a third party special needs trust.
In both instances, the trustee could use assets that have been conveyed into the trust to satisfy the supplemental needs of the beneficiary without causing a loss of benefit eligibility.
There is however a major difference. With a third party special needs trust, the Medicaid/Medi-Cal program does not seek reimbursement for monies spent after the death of the beneficiary.
When a first party special needs trust has been established, Medicaid/Medi-Cal does seek recovery from the estate of the beneficiary after his or her death.
Free Report on Special Needs Planning
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