How can a parent preserve benefit eligibility if a child with a disabling condition is approaching age 18 and there hasn’t been any planning?
There are two types of Special Needs Trusts. The first type of trust is created by a parent, and the money never goes directly into the hands of the child and it can be used for supplemental needs. If the child passes away, there’s no requirement to pay the government back for benefits.
The second type of trust is a Medicaid Payback Trust. Let’s say, for example, that a child reaches age 18 and grandma had set up a custodial account which now has $100,000 in it, under the law, that is a resource because it belongs to the child.
Now what? You want to apply for Medicaid and SSI, but the child has $100,000 in his name. Here, the best option is a Medicaid Payback Trust, which removes the money from the control of the child to create a trust for supplemental needs. However, there’s a big negative to this type of trust. Assume the trust starts with $100,000 and, when the child passes away, there is $25,000 left. If, during the child’s lifetime, Medicaid has provided benefits, Medicaid gets every remaining dollar up to the amount of benefits paid over the child’s lifetime.
Oftentimes the child has a substantial amount of money due to a personal injury settlement. In that case, a lot of money may go back to Medicaid after the death of the child, but it’s better than spending the money down to zero before the child gets government benefits.
What information does a family need to start planning with an attorney?
First, they need to know in general what their intent is, who may be appointed as trustee and what their goals are. Second, financial information is critical, including the parents’ assets; whether the child has money in his or her own name; and what benefits the child may be receiving.
Third, the attorney needs evaluations that have been done, such as a plan done by a county board or a special education plan, information on the child’s background, what the condition is, what the medical report shows and what the prognosis is.
By planning early, a family can ensure that a child with a disabling condition is well taken care of for the duration of his or her life.
Philip S. Kaufmann is partner and chair of the Estate Planning & Probate Group at Stark & Knoll Co., L.P.A. Reach him at (330) 376-3300 or [email protected].