Does Your Loved One Rely on State Health Services? Now Might Be the Right Time to Set Up a Special Needs Trust
Caring for a child, sibling, or other family member with disabilities doesn’t stop at their day-to-day needs. You also have to think ahead and plan for anything that could happen in the future. Who will care for them if you pass away or can no longer do so? How will their government benefits be affected by anything you pass along to them?
The truth is that well-meaning individuals can negatively impact their loved one’s ability to receive state benefits if they leave them assets from their estate. At Entz Burton & Associates, we help clients navigate these and other challenges as they build their estate plan. At our estate planning law firm, attorneys like J. Michael Entz bring decades of experience to their work in Oklahoma. Find out how we can help you by calling us at 405-773-9800.
Why Government Assistance Alone Isn’t Always Enough
Programs like Medicaid, SSI, and Oklahoma-specific services can do a lot to support individuals with disabilities. Disabled individuals often rely on these programs for healthcare, housing, food, and other basic needs. However, these types of programs come with a big catch—income and asset limits.
For example, look at Supplemental Security Insurance, a need-based federal program for disabled and aging individuals. This program is generally not open to those who earn more than $2,000 per month or have more than $2,000 in resources. Imagine a disabled individual who relies on SSI to cover their food and transportation every month—and then they receive $10,000 in cash from a relative who passes away. They are now at risk of losing the benefits they receive, benefits that still leave them with very little at the end of each month.
What is a Special Needs Trust?
That’s why estate planning attorneys often recommend special needs trusts. These trusts allow loved ones to bequeath assets to special needs individuals without endangering the benefits they need to survive. The assets set aside for the benefits of the disabled individual are held by the trust, not given to the individual directly. Because of this setup, the individual’s access to benefits is not threatened, as the assets do not count toward income and asset limits.
An assigned trustee manages the trust and uses the funds within it to improve the beneficiary’s life. They may use these funds to pay for therapies not covered by Medicaid, home modifications, education or job training, transportation, assistive devices, vacations, and hobbies.
Types of Special Needs Trusts
Depending on your beneficiary’s needs and what your estate planning lawyer recommends, there are several types of special needs trusts you may look into for your loved one’s benefit. A first-party or self-settled trust is funded with the disabled individual’s own assets—for example, a personal injury settlement or inheritance. A third-party trust is funded by someone other than the beneficiary, often a parent, grandparent, or sibling. There is no Medicaid payback required. A pooled trust is managed by a nonprofit organization that manages multiple beneficiaries’ funds to invest on their behalf. The option you’re most likely interested in if you’re working with an estate planning lawyer is a third party trust.
The Right Time to Set One Up
The right time to set up a special needs trust is before you think you’ll need it. People often look into this option when a disabled loved one is turning 18 and applying for state benefits as an adult or when they have a lawsuit or settlement pending. You may also want to explore this option when someone is planning to leave an inheritance—setting up the special needs trust from the very beginning is much easier than scrambling to handle assets and protect a beneficiary’s benefits after someone passes away. Once someone loses benefits because of mishandled assets, it is much harder to get those benefits back than it is to be proactive and plan ahead.
Planning ahead also helps you avoid key mistakes. People may include a beneficiary’s assets in a sibling’s or other loved one’s inheritance, trusting them to “just take care” of the disabled individual’s needs. This puts the disabled individual’s stability in danger and leaves them dependent on another person’s goodwill.
Call Our Estate Planning Law Firm to Discuss Your Needs
When you’re ready to move ahead with your estate plan, the team at Entz Burton & Associates is here to provide guidance and support. Our estate planning attorneys can help you manage your assets in a way that protects and provides for your loved ones. Reach out to our estate planning law firm online or give us a call at 405-773-9800.
Attorney J. Michael Entz at Entz Burton & Associates is an experience lawyer in estate planning law, business formation and asset protection serving the families in Oklahoma City and Weatherford office.
