If you are helping support and care for a loved one with a physical or cognitive disability, you want to ensure that they continue to have a comfortable life and the best available care after you’re gone. The federal, state and local governments provide a variety of programs to help people with basic needs, like food, housing and medical care. However, programs like Medicaid and Social Security Income (SSI) are “means-tested.”
Therefore, if you were to leave an inheritance directly to this loved one, even if the assets are managed by a guardian, you could disqualify them from these benefits because they’d have too much money to qualify. By putting assets designated for them in a supplemental needs trust (SNT), you can help ensure that they continue to have more than the basic necessities.
Supplemental needs trusts (also sometimes called “special needs trusts”) are set up to cover “life-enhancing expenses” like private caregivers, specially equipped vehicles, entertainment, travel and much more. When set up properly, they won’t let the assets you’re able to leave your loved one put their public benefits at risk.
Third-party SNTs are the most common in estate planning. If you or anyone other than the person the trust is for funds an SNT with their own assets, that’s considered a third-party trust. Because the assets legally don’t belong to the beneficiary of the trust, the government doesn’t require reimbursement for the money it’s provided via Medicaid and other benefits when that beneficiary passes away.
Note that if you set up an SNT for someone using their own money, that’s considered a first-party trust. Those also let people continue to receive public benefits. However, that money has to be repaid upon their death. First-party trusts are often set up when someone received an award or settlement in a lawsuit after being left permanently disabled in a car crash or other event that was someone else’s fault.
Planning for the future of a loved one who will always require care is typically one of the top priorities for many people as they develop their estate plans. With sound legal guidance, you can rest assured that your assets will continue to care for them after you’re gone.