You should know all the facts when you are planning your estate. There are notions floated on the Internet about the effectiveness of do-it-yourself estate planning. The suggestion is that anyone can plan his or her estate without professional guidance.
In fact, you could make mistakes that yield unintended consequences if you make assumptions and go it alone. With this in mind, we will look at third party special needs trusts in this post.
Each person on your inheritance list is a unique individual. The correct way to provide for one person may not be the best way to provide for the next.
If you use a last will to state your final wishes regarding the distribution of your assets, you may look at it like the slicing of a pie into pieces of different sizes. In reality, this may not be the best approach.
Many families include loved ones with special needs. People with special needs often rely on the Medicaid program for health insurance. In California, this program is called Medi-Cal.
To qualify for Medi-Cal coverage, you must be able to prove that you have very limited financial resources. If a benefit recipient was to receive a significant direct inheritance, benefit eligibility could be lost.
Medi-Cal could pay for millions of dollars of care and treatment over the lifetime of some people with special needs, so coverage is absolutely essential.
Third Party Special Needs Trusts
You could react to the above scenario by making your loved one the beneficiary of a third party special needs trust. This type of trust is called a third party trust because the funding is coming from someone other than the beneficiary.
With a third party special needs trust, you name a trustee to administer the trust. Assets that have been conveyed into the trust can be used by the trustee to satisfy the supplemental needs of the beneficiary. These would be needs that are not being met by government benefits.
As long as the expenditures are for approved purposes, benefit eligibility would not be jeopardized.
It is important to emphasize the fact that the trustee must be the entity that is exclusively handling assets that have been conveyed into the special needs trust. The beneficiary cannot make decisions on behalf of the trust, and he or she cannot directly utilize the trust’s assets
When a third party special needs trust is in place, the Medi-Cal program would not seek reimbursement for monies spent after the death of the beneficiary.
Free Special Report
To learn more about special needs trusts, download our special report. This report is being offered free of charge, and you can obtain access to your copy through this link: San Jose CA Special Needs Planning.
- Act in Advance to Prevent a Conservatorship - April 27, 2021
- Beneficiary Designations and the SECURE Act: Prior Designations - April 20, 2021
- Beneficiary Designations and the SECURE Act: Eligible Designated Beneficiaries - April 16, 2021