November 30, 2009
This edition of the Koldin Report E-Newsletter reviews the use of Supplemental Needs Trusts for individuals with disabilities.
A child (or grandchild) with disabilities is often excluded as a beneficiary in a parent's (or grandparent's) Will to avoid the loss of government benefits. Most government benefits programs, including Medicaid, have strict financial eligibility rules. If the income and/or life savings of a person with disabilities are higher than the eligibility levels, he/she will not be entitled to receive benefits.
Federal and State legislation expressly exempts Supplemental Needs Trusts (Special Needs Trusts) from being considered available in determining eligibility for Medicaid or other Government Benefits programs provided that the Trust contains important language required by the law.
A Supplemental Needs Trust provides that income and principal may be made available to the person with disabilities but only to supplement and not to replace government benefits.
SUPPLEMENTAL NEEDS TRUST FOR YOUR CHILD OR GRANDCHILD FUNDED BY YOU AS PART OF YOUR ESTATE PLANNING
Laws have been enacted that allow you to leave your child (or grandchild) with disabilities an inheritance by establishing a Supplemental Needs Trust. As long as the Trust complies with the strict statutory requirements, assets from the Trust can be used to provide for the well-being of your child (or grandchild) without disqualifying him/her from receiving governmental benefits.
As part of your Estate Planning, you can provide for your children or grandchildren with disabilities by establishing a Supplemental Needs Trust as part of the beneficiary provisions of your Last Will and Testament or as a beneficiary provision of your Revocable or Irrevocable Trust.
Also, if you want to be able to make gifts now to your child or grandchild with disabilities, you can establish a Supplemental Needs Trust immediately as a "living trust" for the benefit of your child or grandchild and make gifts to the Trust for the child to enjoy while you are living.
There are many factors to consider when deciding whether to establish a Supplemental Needs Trust through your Last Will and Testament, Revocable Trust or Irrevocable Trust, or by establishing an immediate "Living" Supplemental Needs Trust. The Koldin Law Center is available to review the advantages and disadvantages of each of these options.
SUPPLEMENTAL NEEDS TRUST FUNDED WITH THE LIFE SAVINGS OF A PERSON WITH DISABILITIES
The life savings of a person with disabilities can also be transferred to a Supplemental Needs Trust for his/her benefit if he/she is under age 65. He/she could then qualify for immediate Medicaid coverage or other government benefits. There is no Medicaid transfer penalty period of ineligibility.
When a Supplemental Needs Trust is funded with the assets of a person with disabilities, the Medicaid Agency must be designated as the primary remainder beneficiary to be reimbursed for any benefits paid on behalf of the person with disabilities. A second remainder beneficiary can be named to receive any balance left in the Trust.
Although this type of Supplemental Needs Trust is funded with the assets owned by a person with disabilities, the law requires that the Trust be created by a parent, grandparent, guardian or Court. The person with disabilities cannot create his/her own Trust. In order to avoid more expensive Guardianship or Court proceedings, it may be advisable for a person with disabilities to establish such a Trust while he/she has a living parent or grandparent even if the Trust will not be fully funded until a later time.
This type of Trust can be very valuable in a personal injury situation. The injured person is no longer required to deplete personal injury settlements on the cost of care. A Supplemental Needs Trust can protect the settlement so he/she can qualify immediately for Medicaid. In addition, this type of Trust is useful in a situation where a person with disabilities directly inherits assets in his/her name that could cause him/her to lose governmental benefits.
With a properly designed Supplemental Needs Trust, the quality of life for a person with disabilities can be greatly enhanced.
The Koldin Law Center, P.C. is available to review your options regarding establishing a Supplemental Needs Trust. We are available to handle the entire Medicaid application process to successfully obtain Medicaid coverage for the person with disabilities.
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