One estate planning issue, that is often overlooked, is the effect that inheritances can have on their loved ones. There are so many different ways to pass on your property and assets after your death and these different methods have both pros and cons. The reality is that your family members and close friends may all be experiencing different life situations, which you cannot predict. One of those situations is needing government benefits, such as Medicaid. Our Medicaid lawyers can explain the many options you have for developing an estate plan, that will satisfy your inheritance plans, while protecting your heirs from unwanted consequences.

Why those with special needs may benefit from Medicaid

If you have a loved one with special needs, then you may already know that many individuals with disabilities find themselves needing Medicaid benefits. Medicaid is a health insurance program jointly administered by the federal and state government. These benefits are often very useful for individuals with special needs because they are unlikely to be able to earn sufficient income but still need health insurance coverage. Because Medicaid is a need-based insurance program it can be a great benefit for many people with special needs.

How Medicaid determines eligibility

When an application for Medicaid coverage is submitted to the Medicaid agency, they will determine eligibility for these need-based benefits, by looking at the applicant’s financial status. At the time of application, your loved one may be eligible based on their income. But receiving an inheritance from you can change that eligibility. That is why our Medicaid lawyers want to remind you that Medicaid eligibility is not permanent, but instead can change with a change in circumstances.

The problem with receiving a significant inheritance

Even after Medicaid has declared someone eligible for benefits, that eligibility status can change if their financial status changes. This means Medicaid can later determine that a benefit recipient is ineligible even after they have been receiving benefits. In other words, your gift of an inheritance to your loved one who is enrolled in the Medicaid program could result in a loss of their benefits. So, before you make that mistake, speak to our Medicaid lawyers.

Medicaid lawyers explain the benefit of Special Needs Trusts

If a person, who was receiving Medicaid benefits, was to receive a large direct inheritance through the terms of a last will, his or her financial status would improve considerably. As a result, government benefits could be lost, because Medicaid is a need-based program. The good news is there is an estate planning solution that is often implemented to preserve Medicaid benefits.

Special needs trusts are often utilized under these circumstances. These trusts are also called supplemental needs trusts. When you create the trust, you name a trustee to handle the trust administration tasks. The loved one who is receiving government benefits would be the beneficiary of the trust. Let our Medicaid lawyers help you set up the appropriate trust.

How the Special Needs Trust works to protect Medicaid eligibility

With a special needs trust, if the funding is coming from someone other than the beneficiary, the trust would be a third party special needs trust. When you create the trust agreement you name a trustee who will administer the trust, and the beneficiary will not have direct control of the trust. Instead, all trust expenditures must be made by the trustee.

Under the rules of Medicaid, the trustee could use assets in the trust to improve the quality of life of the beneficiary. These expenditures would be limited to the satisfaction of needs that are not being met by the government benefits. Essentially, supplemental needs would be anything other than food and shelter. For example, the trustee could use assets in the trust to provide things like education, recreation, dental care, computer equipment, books, etc.

Join us for a free seminar today! If you have questions regarding living trusts or any other estate planning matters, please contact the experienced attorneys at The Potter Law Firm for a consultation. You can contact us either online or by calling us at (704) 944-3245 or for individuals in Kentucky at (606) 324-5516 (Ashland, KY) or at (859) 372-6655 (Florence, KY).