How to Protect a Disabled Person’s Right to Public Benefits

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If you have a relative who is severely disabled and can not work, you may worry about how that person would continue to receive the public benefits he or she desperately needs if you or someone else in the family were to pass away and leave him or her money. This issue usually comes into play when a parent is planning his or her estate and has a disabled child (minor or adult) to think about. If a parent leaves money to the child, it could disqualify the child from receiving lifesaving benefits, like Medicaid, Medicare, Social Security, and more. So, what is the solution?

At Five Points Law Group, our estate planning attorneys can craft a carefully prepared special needs trust to protect a disabled person’s interests, while preserving his or her rights to public programs and benefits. Here is how these trusts work.

Eligibility for Medicare and Medicaid

For aging parents of a disabled child, it can be a scary time. It may be clear that without public health benefits, a child may have no way to care for him or herself. At the same time, aging parents may want to make sure that their inheritance is not wasted. Thus, through careful estate planning, there are ways to do both leave money to the disabled child, while simultaneously maintaining his or her right to utilize benefits. This is often done through an Alabama special needs trust (SNT).

How Does a Special Needs Trust Work?

There are two kinds of SNTs — a third-party or a first-party trust. The one you use depends on the circumstances.

  • First-party trusts: A first-party trust is one that is funded using a disabled adult’s own money. This is commonly used when the disabled individual has come into money from some outside source, such as through a personal injury action or an inheritance that was not planned in advance. Perhaps a relative has given the person money. In these situations, the disabled person can establish a trust that protects the money, while maintaining eligibility for SSDI, SSI, or other benefits. There are strict rules about how the money can be spent, and regarding pay-back provisions to Medicaid after death.
  • Third-party trusts: This type of trust is settled (or “funded”) by someone other than the disabled person. Usually, this is the best option for relatives who want to leave significant assets to a person with disabilities. Under federal and state laws, the money can be used to pay for things that may not already be covered by Medicaid or Medicare, such as certain medical costs, daily living support, or adaptive devices. Since the money never technically becomes the property of the disabled person, it remains largely protected against spend downs and pay-back provisions.

To discuss this option with a skilled estate planning attorney near you, call Five Points Law Group today.

Kristin Waters Sullivan
Kristin Waters Sullivan
As a partner at the Five Points Law Group, Kristin brings her vast experience in Estate Planning and Probate Law to serve her clients’ and their families’ needs.

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