A supplemental needs trust can help preserve a beneficiary’s eligibility for government-based assistance programs while also allowing the beneficiary to receive gifts or an inheritance that can make a significant difference in his or her life.
At Golightly Mulligan & Morgan, we can provide customized legal solutions that allow you to help a disabled loved one without affecting his or her continued eligibility for public benefits.
Eligibility for Government-Based Assistance Programs
In the special needs context, the two most commonly discussed programs include Supplemental Security Income (SSI) and Medicaid. These are both needs-based programs.
SSI is a federal program that provides food and shelter for our country’s population in need. Medicaid is a federal/state partnership that is designed to provide certain medical services for those in need.
To be eligible for these types of benefits, recipients must be able to demonstrate a lack of basic financial resources and must meet certain income and resource thresholds.
Social security requires SSI recipients to have less than $2,000 in countable assets for a single person, and $3,000 for a married couple. In general, the income limit for SSI is the Federal Benefit Rate, which is $750 per month for an individual and $1,125 per month for a married couple.
In order to participate in Medicaid, federal law requires states to cover certain groups of individuals including low income families, qualified pregnant women and children, and individuals receiving SSI. Income requirements for Medicaid in Virginia are determined through use of the Modified Adjusted Gross Income (MAGI) calculator. If you are a pregnant woman, the income limit is set at 143 percent of the federal poverty level in Virginia. If you are blind, aged, or disabled, you can earn no more than 80 percent of the federal poverty level to qualify for Medicaid.
When You Might Need a Supplemental Needs Trust
We often see the need for the preservation of these benefits if a child has a disability or condition that may ultimately result in his or her need for these benefits down the road.
It is important when putting together an estate plan that you do not cause him or her to be disqualified for these important benefits.
You need to understand that if a recipient receives assets outright from a trust or estate, he or she will likely be disqualified from receiving these benefits under the very stringent income and resource guidelines.
However, with a carefully drafted supplement needs trust, parents and grandparents can ensure that any inheritance will not interfere with the beneficiary’s eligibility for these benefits.
How a Supplemental Needs Trust Can Be Used
The trust funds should be used on supplemental items that are not covered by the beneficiary’s public benefits.
For example, the trustee can spend money on behalf of the beneficiary for vacations and leisure activities but not for things like rent, groceries and similar necessities for which the benefits are provided.
A well-drafted supplemental needs trust will provide detailed instructions and will allow the trustee to amend the trust to ensure continued eligibility for these programs.
Requirements of Supplemental Needs Trusts
One of the key requirements of a special needs trust is that money from the trust must be used to supplement and cannot overlap with current benefits being provided to the recipient for programs such as SSI or Medicaid.
Additionally, a trustee must be appointed to administer supplemental needs trusts. He or she serves as an intermediary between the beneficiary and the trust assets. The trust instructs the trustee to make distribution of trust assets in a manner that does not affect the beneficiary’s eligibility for benefits.
Contact an Experienced Trust and Estate Planning Lawyer
If you would like to create a supplemental needs trust that protects your loved one’s continued eligibility for public benefits, a Virginia estate planning attorney at Golightly Mulligan & Morgan can help.
At Golightly Mulligan & Morgan, we pride ourselves on making estate planning approachable and understandable. We would be happy to discuss supplemental needs trusts further with you and to inform you whether this estate planning tool may be an effective part of your estate plan.
To learn more about these supplemental needs trusts, please give us a call at 804-658-3873 to set up a no-charge phone consultation.