Medi-Cal is California’s version of the Medicaid program. This program provides health insurance for people who can meet the eligibility requirements. These requirements are stringent, because Medi-Cal is a need-based program. It is intended for people who have little to no financial resources.
If you have a disability, you may find it difficult to earn income, so your resources may in fact be limited. As a result, many people with disabilities are enrolled in the Medi-Cal program. Clearly, health insurance is essential for people with special needs, so this coverage is a lifeline of sorts.
The Supplemental Security Income program is another need-based program that is very important for many people with special needs. The purpose of the program is more or less self-explanatory: SSI is a source of income for people who cannot earn much because they are disabled.
Due to the fact that eligibility for these programs is based on financial need, a positive change in financial status may not be so positive after all. Benefit eligibility is not necessarily permanent, and it could be forfeited if a recipient was to come into a good bit of money.
Special Needs Trusts
A special needs trust can be used to preserve government benefit eligibility. There are first party or self-settled special needs trust, and there are also third party special needs trusts.
A first party special needs trust would be funded with property that is owned by the beneficiary with special needs. For example, the person may become disabled due to injuries that were sustained in an accident. The personal injury settlement could be used to fund the first party special needs trust.
The beneficiary cannot directly handle the assets in the trust, but the trustee could use the resources to pay for things that the government benefits do not cover. These are called supplemental needs. Eligibility would not be jeopardized, but the Medi-Cal program would seek reimbursement from the estate of the beneficiary after his or her death.
There are some similarities and some differences with a third party special needs trust.
The trust is a third-party trust when the funding is coming from someone other than the beneficiary. The same situation exists with regard to the trustee’s ability to use funds that have been conveyed into the trust to satisfy the supplemental needs of the beneficiary without impacting government benefits.
However, when a third party special needs trust has been established, Medi-Cal would not seek reimbursement after the death of the beneficiary.
There is a lot to take into consideration if you want to help someone with special needs who is enrolled in government benefit programs. If you would like to discuss things with a licensed professional, contact us through this page to set up a free consultation: San Jose CA Special Needs Planning.