Can an Inheritance Cause a Loss of Government Benefits?

Leaving someone an inheritance should be a positive thing on every level. However, there are different ways to go about it, and leaving a direct lump sum inheritance to everyone on your list is not always a good idea.

With this in mind, let’s look at people with special needs and the government benefit programs that they often rely upon.

Medicaid and Supplemental Security Income

Health insurance is obviously essential for people with special needs, and Medicaid is often the source. This jointly administered federal/state government program is in place to provide health insurance for people with very limited financial resources.

Individuals with disabilities who cannot earn income on their own may also be able to qualify for a government program called Supplemental Security Income.

Since these programs are only available to people with very limited financial resources, you cannot qualify if you have countable assets that exceed $2000 in value. Once you have been deemed eligible for Medicaid and SSI, your eligibility is not necessarily going to be in place forever, regardless of the circumstances. If a person who is enrolled in these programs were to receive a significant inheritance, the person could become ineligible for benefits.

What’s the Solution?

An estate planning solution exists in the form of a supplemental needs trust. These trusts are often referred to as special needs trusts.

You could establish a supplemental needs trust and make your loved one with a disability the beneficiary. In the trust declaration, you would name a trustee to handle the trust administration tasks.

There are certain needs that are not going to be met by the government benefit programs. The beneficiary cannot directly receive funds in the trust without causing a loss of benefit eligibility, but the trustee could use the assets to satisfy some of these unmet needs.

Ongoing eligibility would not be impacted if the trustee acts within the guidelines. Plus, the Medicaid program could not seek to take any funds left in the supplemental needs trust after the death of the beneficiary.

Learn All the Facts

In this brief blog post we have provided some very basic information about the subject of special needs planning. You should certainly learn more about the government benefit program rules and regulations if you are going to include a loved one with special needs in your estate plan.

Our in-depth special report on this subject will provide you with all of the information that you need. To obtain your copy of this free report, click this link and follow the simple instructions: Charlotte NC Special Needs Planning.