Estate Planning to Preserve State Funded Benefits

Our disabled population is at risk of losing state funded benefits if they receive an unexpected inheritance or settlement funds. Proper estate planning can help preserve both the benefits and the inheritance or settlement funds. Additionally, the enactment of the Special Needs Trust Fairness Act in December 2016, allows for competent individuals to setup a Special Needs Trust without seeking court approval. Individuals with disabilities are often eligible for and participate in government programs that assist them in covering the costs of their long-term medical care. Some examples include Medicaid (or Medi-Cal), Supplemental Security Income, and services for the developmentally disabled through local regional centers. These government programs have income requirements for participation, some as little as $2,000 in liquid assets. This means, that if a disabled individual has liquid assets in excess of $2,000 they are no longer eligible for these necessary government benefits. The problem arises when disabled individuals receive an inheritance from a deceased relative or settlement funds from a lawsuit unexpectedly. Once the funds are transferred into the disabled person’s name, they are at risk of losing the medical care they were receiving from state funded programs. Establishing a Special Needs Trust  Proper estate planning and preparation of a Special Needs Trust for a disabled beneficiary can help preserve both the state funded benefits and the inheritance or settlement funds. The purpose of the Special Needs Trust is to provide a means for allowing some funds to be used by the disabled person for their healthcare, without interfering in the government benefits which they are receiving. One important limitation in establishing a Special Needs Trust, is that the beneficiary must be under the age of 65 when the trust is established. The beneficiary must also be a developmentally disabled minor or adult. There are many types of disabilities that qualify for a Special Needs Trust, including disabilities that start at birth or in childhood. The disability can also start later in life and after a person is an adult due to an accident or late onset mental illnesses, such as dementia, Alzheimer’s, Parkinson’s and even alcoholism. Now, establishing a Special Needs Trust has gotten even easier for disabled beneficiaries. On December 13, 2016, President Obama signed into law the Special Needs Trust Fairness Act, which allows individuals with disabilities, who have mental capacity, to create their own Special Needs Trusts. Under the prior law, only a parent, grandparent, legal guardian, or court could establish a Special Needs Trust. This means that under the old law disabled individuals who received an inheritance had only to ways to preserve their state funded benefits: (1) hope that their parents or grandparents had established this type of trust for the disabled beneficiary in advanced; or (2) file a petition with the court to prepare a Special Needs Trust, which is costly and time consuming. Now, disabled individuals under the age of 65 with assets which would otherwise disqualify them from Medi-Cal or other state funded benefits, can establish and fund their own Special Needs Trust without seeking court approval. Please contact our firm for more information about Special Needs Trust and estate planning strategies. By: Lauren M. Doyle, Esq. Lauren-Doyle-20138806 This is not legal advice, but a Newsletter containing information to help you understand the new laws affecting Special Needs Trust, please consult with an attorney regarding any estate planning needs.  

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