Protecting Benefits for Loved Ones with Disabilities

By: Jane-Marie Schaeffer, Esq.

special-needs-independenceOctober is National Special Needs Law Month, dedicated to educating individuals with special needs, their families, and caregivers about their legal needs, future care planning, and advocacy. As a Board Member for Consumer Directed Choices, I recognize the importance of promoting independence for individuals with disabilities, and supporting living in the community. There are many great programs and networks to help these individuals find a way to stay at home and live as independently as possible. Medicaid is one program that provides funding for community services, such as home health aides and nursing care to assist individuals living at home. However, to qualify for Medicaid one must meet strict income and asset thresholds.

Many adults with intellectual and developmental disabilities work in their communities. The United States Bureau of Labor Statistic found, on average, workers with disabilities face significant gaps in pay and compensation. As a result, an individual with special needs may have income or assets that are just over the Medicaid qualification amount,  so do not qualify for Medicaid services, but on the other hand do not have enough funds to pay privately for the care they need. Worse yet, an individual may already be receiving benefits and service, but receive a gift or inheritance from a parent, grandparent, or other relative which then makes them ineligible for Medicaid services, with disastrous results.

Can such a result be avoided?
special-needs-trusts-nyYes, with careful planning and the use of a Special Needs Trust (SNT) one can keep the extra resources and still maintain Government benefits and services.

Special Needs Trusts, or Supplemental Needs Trusts, provide a way for an individual to retain excess assets or income and still qualify for Medicaid and SSI. A Special Needs Trust is a legal document that provides for the management of assets by another individual, called the Trustee, for the benefit of the individual with the disability, also called the Beneficiary.

There are three primary types of supplemental needs trusts:

  • First Party Supplemental Needs Trusts;
  • Third Party Supplemental Needs Trusts; and
  • Pooled Supplemental Needs Trusts.

supplemental-needs-trustA First Party Supplemental Needs Trust is funded with the assets of the person with the disability, and such assets remain exempt for Medicaid purposes. This can include settlement money from a personal injury or medical malpractice lawsuit.  During the lifetime of the beneficiary the trust assets can be spent on the “supplemental needs” of the beneficiary, such as extra therapy, recreational activities, adaptive technologies, education, and medical equipment. However upon the death of the person with the disability, any assets remaining in the trust must be repaid to the state Medicaid agency to reimburse the state for the Medicaid services provided to the individual. Such trusts are also called “payback trusts”.

third-party-sntA Third Party Supplemental Needs Trust is funded with the assets of a third party, such as a parent, grandparent or other relative, who wants to benefit the individual with the disability. These assets can be used for the supplemental needs of the individual during their lifetime. Upon the individual’s death, the assets are not subject to a “payback” provision, and can be passed to other family members. It is important to inform family members of the SNT to ensure they have the proper language into estate planning documents or name the trust as beneficiary. It is common to form an SNT early in a child’s life as a means for holding assets and making gifts to help pay for items that Medicaid does not cover.

ny-pooled-trust-benefitsA Pooled Supplemental Needs Trust is a trust that is managed by a non-profit agency for many different individuals. It is typically used for smaller amounts that do not warrant setting up an individual supplemental needs trust. It is also used for individuals on Medicaid that have excess income over the Medicaid allowed amount, usually called the spenddown amount. These individuals can place the spenddown into the pooled trust each month and still qualify for Medicaid. The amount that is in the trust can be used for the individual’s living expenses each month; any amount that is left upon the individual’s death typically remains with the non-profit organization to be used for other individuals in the trust.

The main benefit of Special Needs Trusts is to provide a better quality of life for the person with a disability, while maintaining government benefits.  To learn more about Special Needs Planning, please contact the Herzog Law Firm to schedule a free consultation at 1-800-777-7581.

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