In Virginia, a simple will is the most basic estate planning document and can be a good choice for those who have no children under the age of 18, and have uncomplicated estates.
For those who are leaving behind a loved one with a disability, there are many things to think about, and estate planning must be done especially carefully. Otherwise, your loved one’s ability to receive certain governmental benefits such as SSI and Medicaid, could be significantly compromised after you are gone. You can set up a special needs trust in your will, and avoid these types of problems. While owning a home, a car, and normal personal effects does not affect SSI and Medicaid eligibility in itself, other assets, particularly cash in the bank could disqualify your loved one with special needs from receiving benefits. As an example, leaving that person as little as $10,000 in cash could potentially disqualify him or her from receiving Supplemental Security Income and Medicaid benefits.
The best way to avoid losing SSI or Medicaid eligibility for your loved one, is to create a special needs or supplemental needs trust. SSI is a government program which assists those with special needs—and low incomes. To qualify for SSI, the beneficiary may only have $2,000 in his or her own name. If the person has more than $2,000 in their name, the government allows SSI qualification so long as those excess assets are placed into a first-party special needs trust, created by a parent or grandparent.
First-Party and Third-Party Trusts
So long as the special needs beneficiary is alive, all funds in the trust are to be used for his or her benefit, however upon the death of the beneficiary, remaining assets in the first-party special needs trust will be used to reimburse the government for costs associated with medical expenses. A third-party special needs trust does not contain the “payback” provision found in first-party trusts. This means that upon the death of the beneficiary, remaining funds can be distributed to other family members or charities.
Choosing a Trustee for Your Special Needs Trust
When a special needs trust is set up, you can choose a trustee who will be in charge of spending money on behalf of your loved one with special needs. Because your loved one has no control over the money, all property in the trust is ignored for purposes of program eligibility. When the beneficiary of the trust dies—or the funds have been depleted, the trust will cease to exist. The trustee you choose for to oversee the special needs trust is allowed to spend trust assets in order to purchase services or items for your loved one, however he or she cannot give the money directly to your loved one.
Such things as medical and dental expenses (co-pays or premiums) expenses related to attendants for personal care, necessary furnishings for the home, vehicles, education, rehabilitation expenses, and even recreational items or vacations can be funded from the special needs trust. In its simplest form, a trust is a relationship between the person supplying the trust funds, the trustee who administers and holds the funds according to the donor’s wishes, and the beneficiary who will receive the benefits of the funds. The person who supplies the trust funds will often set forth in a document instructions regarding how he or she wants the funds to be spent. A special needs trust can hold almost any type of asset, including investments, stocks, bonds, a home, other real estate properties and cash.
If you need comprehensive, knowledgeable estate planning advice in McLean, Vienna, Fairfax, Reston Arlington, Alexandria, Falls Church, Tyson’s Corner, Sterling or Great Falls, contact us today or call (703) 938-3510.