If you care for a disabled individual, you are no doubt aware of what is required to maintain proper care for them, including both medical and personal needs. You are most likely familiar with the need-based government assistance programs, Medicaid and/or Supplemental Security Income (SSI). Eligibility for these two programs is determined by income. For example, to meet the SSI income requirements, you must have less than $2,000 in assets (or $3,000 for a couple) and a very limited income.
So, what is required to plan for the future needs of your disabled loved one, while protecting their eligibility for these much needed government benefits programs? One valuable tool is a Supplemental Needs Trust.
A “Supplemental Needs Trust” is a type of trust created for the benefit of someone with a disability. It is a specific type of special needs trust that provides for the needs of someone who is disabled, without disqualifying that person from benefits they may be eligible to receive under Medicaid or SSI or some other income-based benefit program.
How does it work?
Many people who have had any experience with government benefits know that a person with a disability cannot have a trust. However, a Supplemental Needs Trust does not actually belong to the disabled person. Instead, it is established and administered by a trustee, and the person with the disability is the beneficiary of the trust and receives the benefits. The trustee retains complete discretion in determining the distribution of the assets to the beneficiary.
A difficult decision for a parent or relative of a disabled person is how that loved one will be cared for in the future. If your child becomes a recipient of Medicaid or SSI, it is imperative that any inheritance your child subsequently receives be placed into a trust. That way your child will not have to lose his or her government benefits.
When you put a plan in place for the future care of your disabled loved one, you need to address three important issues: (1) who will be responsible for caring for the disabled person, (2) how to leave money for the disabled person while not jeopardizing any government benefits, and (3) making sure the disabled person is going to be properly cared for in the way that you intend.
These important factors need to be addressed now, rather than later. Otherwise, you run the risk of a catastrophe if you pass away or become incapacitated before these decisions can be made and planned for.
Don’t forget to include specific personal needs?
When planning for your loved one’s future care, in the event that you are unable to provide that care yourself, consider including instructions and provisions that will ensure their preferences are taken into consideration. For example, how will a new guardian or trustee know that your child loves going to baseball games? How can you make sure that your child will continue to attend certain camps and local events that they look forward to every year? The future caregiver will not know if you do not provide that information while you still can. These instructions can be included in the trust language, which will in turn give you the peace of mind in knowing that your child’s needs and desires will be met.
A Supplemental Needs Trust, like other special needs trusts, are highly complicated legal tools that are generally scrutinized by Social Security and/or the Department of Human Services. As such, it is crucial that you employ an Arkansas estate planning attorney who deals with these issues routinely and who is knowledgeable about the drafting requirements and pitfalls of these instruments. If you have any questions about the planning techniques discussed above, please feel free to call us to discuss planning options.