They say that you should use the right tool for the right job. This comes into play when you are planning your estate. There are various different legal devices that can be used to arrange for the transfer of assets to others. You should become apprised of your options and make the optimal choices.
With this in mind, let’s look at special needs trusts.
People With Disabilities & Medi-Cal
People who have disabilities often rely on government programs, and Medi-Cal is one of them. Medi-Cal is a health insurance program for people with financial need. Clearly, people with disabilities are going to incur significant health care costs. Medi-Cal coverage is absolutely essential for these individuals.
Once you gain eligibility it is not necessarily permanent. If you were to experience a significant change in your financial status, your eligibility could be terminated.
A significant inheritance could catapult someone with a disability into a different financial stratosphere. As a result, his or her benefit eligibility could be lost. This is something to keep in mind when you are planning your estate if you have someone with special needs on your inheritance list.
Under these circumstances, you would want to consider the creation of a special needs trust.
Special Needs Trusts
With a special needs or supplemental needs trust you name a trustee to administer the trust, and you name a beneficiary who has special needs. The trustee manages the funds, and he or she is empowered to use trust assets to facilitate expenditures that improve the quality of life of the beneficiary.
Monies that have been conveyed into the trust can be used for supplemental purposes. In general, trust resources can be used for supplemental expenses that would not be covered by government benefits.
A Word About DIY Estate Planning
When you consider the reasons why someone would want a special needs trust, you can see why do-it-yourself estate planning is risky.
Everyone knows that you can use a last will to record your final wishes regarding the distribution of your assets. Some people believe that trusts are only useful for wealthy people.
You may have nothing but the best intentions. You go online and create a last will using a download that you purchased from a DIY legal document website. There is someone with a disability who relies on Medicaid coverage named in the will.
Ultimately, the inheritance could wind up doing more harm than good. Much-needed government benefits could be lost until the inheritance was used up paying for care that was previously covered by Medi-Cal.
Unintended negative consequences can result when you go forward without discussing things with a licensed estate planning attorney. This is something to keep in mind if you are considering the DIY route.