Before we address the question that serves as the title of this post, we should provide some background information about Medicaid, Supplemental Security Income, and the plight of disabled individuals.
Need-Based Government Benefits
Medicaid is a jointly administered state/federal government health insurance program that can potentially be available to financially needy individuals. Because it is a need-based program, there is a $2000 limit on countable assets.
A significant percentage of people with special needs are unable to work, so they do not get health insurance through their jobs, and they can’t purchase it on their own. Consequently, many people with disabilities qualify for Medicaid coverage.
Health insurance is something that everyone needs, but without question, if you have a disability, it is going to be an absolute necessity. There are people with disabilities who incur medical bills that can exceed $1 million over the course of their lifetimes. For people who are in this situation, Medicaid is a godsend.
Supplemental Security Income (SSI) is another government program, and as the name would suggest, it provides income to disabled individuals who have little to no earning power. Many people with special needs who rely on the Medicaid program also receive income through the SSI program.
When an individual is attempting to gain eligibility for these programs, the administrators will make eligibility decisions based on the financial status of the applicant at the time of the submission of the application. If eligibility is approved, the eligibility is not necessarily etched in stone forever. A windfall of money can result in a forfeiture of eligibility.
This scenario could develop if a benefit recipient was to come into a significant sum of money through an inheritance or personal injury settlement.
Supplemental Needs Trusts
Government benefit eligibility could potentially be protected through the establishment of a supplemental needs trust. A first party or self-settled special needs trust is a trust that is created with the beneficiary’s resources.
Assets in the trust are not counted when it comes to eligibility for these government programs. However, the trustee that is named in the trust agreement could utilize resources in the trust to improve the beneficiary’s quality of life
There is a downside to this arrangement. When a first party special needs trust has been established, the Medicaid program would try to attach funds that are left in the trust when it seeks reimbursement from the beneficiary’s estate after his or her death.
Download Our In Depth Special Report
If you would like to obtain detailed information about special needs planning and supplemental needs trusts, we have a valuable resource that you can access through this website. Our firm has prepared a comprehensive special report on the subject, and you can access your copy through this link: Dallas TX Special Needs Planning.