There are a variety of estate planning tools that you can use to make sure the assets you have worked for during your lifetime are properly protected, preserved and distributed. Everything from powers of attorney to Wills may be used to make sure your wishes are properly expressed. Before you pass on; however, there are other types of care that you may need to provide for your loved ones. Special care such as nursing homes or care for disabled adult children can be costly. In many cases, these extra costs of care are funded through Medicaid. However, because Medicaid requires the recipient to use or “spend down” almost all of their assets to become eligible to receive benefits, it may be advantageous to create a special needs trust in order to help protect such person’s Medicaid eligibility while still providing them with access to an appropriate amount of funds. There are several different types of Medicaid trusts that can be used to help achieve this goal.
One type is a disability trust. A disability trust can only be established for people under the age of sixty-five. The trust must be funded entirely with the person’s own assets. If there are any assets remaining in the trust at the time of the person’s death, those assets must first go to Medicaid to repay the cost of the person’s medical care. If any proceeds remain in the trust after reimbursing Medicaid, the person’s heirs may receive this amount pursuant either under the terms of such person’s Will or the laws of intestacy if he or she does not have a Will.
Another type of special needs trust is a third party trust. This type of trust is created to help an elderly or a disabled person, meaning the trust does not have an age restriction like a disability trust. This trust is created using the assets of a person who is not the recipient of the Medicaid benefits. One situation where this may be used is where friends or family members want or need to contribute to someone’s care without risking the person’s eligibility to continue to receive Medicaid. A direct gift to the person could mean that he or she now has substantial assets, making him or her ineligible. Properly funding this type of trust can avoid that issue.
A testamentary trust can also be arranged to fund the care of a loved one after your passing. A testamentary trust is one that is created and funded with your assets at the time of your passing. Like a third-party trust, it allows you to make a large asset gift for the benefit of your friend or family member without removing their eligibility for Medicaid benefits.
If you are thinking of setting up a special needs trust, or any other type of trust, you need the help of experienced estate planning attorneys. We can talk to you about reaching your goals. Contact us today at 720-420-1777