If you have a child or loved one that has or needs access to public benefits such as Medicaid, Supplemental Security Income (SSI), or TennCare, you are probably aware that your relative cannot own property or receive income over certain asset limits set by the government. These types of public benefits programs are considered means tested benefits. That means that the government is assisting people who lack the income or assets to pay for care or living expenses. The government is assisting people who have disabilities, such as a condition that is disabling according to social security rules and definitions. The Social Security Administration defines disability as a physical or mental condition that prevents a person from engaging in any substantial gainful activity and is expected to last for 12 consecutive months.
A person who is disabled and receiving benefits Will lose his or her valuable benefits by receiving an inheritance, gift, or settlement for personal injury. There are ways to plan around and prevent the loss of benefits. And ,more thankfully, these careful methods of planning – using a Special Needs Trust (SNT) – do not include disinheriting your disabled child.
Careful planning is necessary. You can plan in advance and use a S N T for the benefit of your loved one. A properly crafted and funded S N T will allow money to be used to supplement the needs of a disabled person. The SNT will pay for services or items that the public benefit program is not paying for – those additional costs, services or items that improve quality of life for a disabled person. For example, the SNT provides for additional education, transportation, entertainment, or special and innovative therapies not approved by Medicaid or TennCare.
A S N T can be created in a will or revocable living trust or other lifetime trust. It can be created by a Court in a personal injury or medical malpractice action. It can be authorized in a conservatorship or through a probate proceeding. The Special Needs Trust should be carefully drafted, purposefully funded, and meticulously managed.
Sometimes a S N T will have to contain a provision that allows the Trustee to pay back the government at the death of the beneficiary. These are called “pay back” trusts. Not all SNTs are pay back trusts but many are, particularly when the money used to fund the trust belongs to the beneficiary.
Special Needs Trusts are a very useful tool in Medicaid planning but are not helpful for Veterans Benefits planning. Special Needs Trusts are often essential in personal injury actions, medical malpractice, or other cases involving devastating injuries.
McDonald, Levy & Taylor does planning and drafting of Special Needs Trusts for its clients and other attorneys and personal injury firms in the East Tennessee region. It is an essential part of estate planning for anyone who has a disabled child, spouse or loved one to care for during life or remember as part of their estate.