How your estate plan can help your loved ones who have special needs

On Behalf of | Nov 9, 2023 | Estate Planning |

Recently, we discussed how estate planning clients use trusts to ensure they can get long-term care if and when they need it. By using a similar strategy, estate planning clients can also take care of their loved ones who have special needs.

A special needs trust, also known as a supplemental needs trust, is a way of providing funds for a person who has a serious disability while maintaining the person’s eligibility for Medicaid and other benefits programs.

Maintaining Medicaid eligibility

Medicaid is a federal program that can pay for the long-term care and medical needs of people with severe disabilities. However, the program was designed to help the poor. With that in mind, one must pass a means test in order to be deemed eligible for Medicaid.

The cutoff point for the means test is quite low: Under New York’s rules, a single adult between the ages of 20 and 65 may need yearly income well below $20,000 to be eligible. The means test also looks at the person’s resources, including bank accounts and more.

Because of the means test, merely providing for a disabled loved one in a will can make them ineligible for Medicaid. However, if the resources remain in a trust rather than in the disabled person’s immediate position, then they may retain their eligibility for Medicaid. In addition, they may receive a certain amount in payments from the trust in order to help with their needs. The trustee can ensure that these payments do not make the beneficiary ineligible for their much-needed benefits.

Special concerns

There are some special formal requirements for special needs trusts under New York law. When setting up a special needs trust, you should also make sure the trustee understands all the nuances involved and the needs of the disabled person.