Leaving a special needs or depending child an inheritance can disrupt their Medicaid and Supplemental Security Income (SSI) eligibility. You can ensure you receive both their inheritance and the benefits they need with special trusts.
SSI and Medicaid are means-tested benefits with income and asset caps. To comply with the rules but also provide for your child or dependent, consult a skilled attorney at Parks Zeigler, PLLC, to discuss third party special needs trusts in Virginia Beach.
Defining a Special Needs Trust
Third party special needs trusts are legal mechanisms in which trustors deposit assets and to be controlled, by someone other than a beneficiary, as trustee. Beneficiaries named in special needs trusts cannot determine for themselves how the money will be spent. The trustee controls how much and for what purpose distributions are made. The trust money does not count toward resources under Medicaid and SSI policy, provided the trust is properly drafted.
Special Needs Planning Trusts
The third-party special needs trust can be revocable or irrevocable and is most often used by grantors wishing to protect a disabled loved one. They can name a trustee, even themselves, and specify what becomes of the remainder after the disabled beneficiary dies. This differs from the first-party trust in which Medicaid is entitled to repayment from the remainder.
It is called a third-party trust because someone other than the disabled person funds it, for example, a parent with their life insurance policies or retirement accounts or any other family member or friend. Trustees should consider the following when managing a third-party special needs trust:
- Keep detailed records of expenditures because state law requires annual accountings, and certain distributions may need to be disclosed to the Social Security Administration or local Medicaid office.
- Use trust distributions to supplement the needs of the beneficiary. Using them for shelter-related expenses to reduce SSI benefits. Stay in touch with the disabled person’s case manager, care providers, and physicians to remain aware of their needs
Do not distribute cash directly, as such is seen as income that could disrupt benefits.
Some non-profit organizations act as trustees for special needs persons by managing pooled trusts that shield assets from counting toward the cap for government benefits. Several beneficiaries maintain individual accounts in the larger pool, from which assets are invested as one.
Talk to Us About Third Party Special Needs Trusts in Virginia Beach
Remembering a disabled child or other loved one in your will is a lovely gesture, but a sudden influx of money can compromise your beneficiary’s government benefits, specifically Medicaid and Supplementary Security Income if received outside of a special needs trust.
A special needs trust can preserve their government benefits and allow you to earmark funds to enrich their life. Although pooled and first-party trusts are also good choices, the third-party trust gives you the most control over how the money is spent. Parks Zeigler, PLLC can offer compassionate advice, answers to your questions, and estate planning documents tailored to your needs. Call today to discuss third party special needs trusts in Virginia Beach.
