Disabled loved one on Medicaid? Consider a special needs trust

On Behalf of | Jan 16, 2020 | Medicaid Planning |

If you have a loved one with a disability who relies on Medicaid, you may be surprised to hear that your financial support could get them kicked off the program. Acquiring assets can affect their eligibility for Medicaid and other government assistance.

If your loved one needs Medicaid, chances are you can’t afford to provide alternative health insurance for them. Nevertheless, leaving even a couple of thousand dollars in a will could mean that your loved one is no longer eligible for Medicaid or other government assistance until the money runs out.

There is a way to give money or assets to someone with a disability who relies on government programs. You can set up a special needs trust. This is a trust that is intended to provide “supplemental and extra care” to a person with disabilities. It is generally not intended to provide the beneficiary with basic support, or funds to live on.

A trust is not owned by its beneficiary

When you set up a trust, you place money or assets into the trust to fund it. Then, decisions about how that money should be sent are left up to the trustee. The trustee can be a trusted friend or family member, or a professional. In the case of a special needs trust, the trustee is given instructions to pay out the money under specific conditions.

Specifically, the money from a special needs trust could be used for items that are not covered by Medicaid or other government assistance programs but which could improve your loved one’s quality of life. For example, the money could be used for:

  • Out-of-pocket medical or dental expenses not covered by Medicaid
  • Medical equipment, including eyeglasses
  • Exercise equipment
  • Transportation
  • Life and auto insurance
  • Recreation and entertainment
  • Computers
  • Home improvements and accessibility
  • Vocational rehabilitation
  • Personal care attendant
  • Education

Because the beneficiary does not have direct access to the funds, Medicaid and other government assistance programs do not consider special needs trusts when determining eligibility.

Another situation where your loved one might benefit from a special needs trust is when they have received a verdict or settlement in a lawsuit. The proceeds of the lawsuit can be placed in a special needs trust to avoid affecting the person’s Medicaid eligibility.

Whether your loved one is currently on Medicaid or might someday need the assistance, talk to an experienced Medicaid planning attorney before you give any substantial amount of money to your loved one or for their care.