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Special Needs/Supplemental Needs Trusts
If a beneficiary is a recipient of certain government benefits, restrictions on how much assets that beneficiary can have in her or her name may apply. A direct inheritance could cause this beneficiary to lose his/her government benefits.
A special needs or supplemental needs trust can hold additional assets for the beneficiary while protecting the beneficiary’s rights to government benefits.
Special rules apply to how assets in a Special Needs/Supplemental Needs Trust can be used. Most important, assets in these types of trusts cannot be used for care/services that the government benefits are supposed to cover. The assets can be used to improve the quality of life of these beneficiaries.
Once a disabled individual reaches the age of 18, the age of majority, again the law recognizes this individual as an adult, regardless of the individual’s ability to care for themselves or manage his/her affairs. A court appointed guardianship may be necessary in order to still be able to address and assist with the individual’s health concerns and assets. This process is best started before the individual turns 18 to prevent any lapse in authority to care for the disabled individual.
There are 2 types of Supplemental needs trusts. A first party trust and a 3rd party trust.
A first party trust will receive assets the beneficiary themselves is entitled to. When the beneficiary’s assets are put in to this type of trust, the beneficiary will not lose their government benefits but if there are any assets left at the time of the beneficiary’s death, the government benefits will have to be paid back. This is also called a “pay back trust”.
A way to avoid a “pay back trust” is to create the second type of supplemental needs trust, the 3rd party supplemental needs trust.
A 3rd party supplemental needs trust receives assets owned by someone other than the beneficiary, i.e. a parent, sibling, friend, etc.
The Grantor, (the person who owns and is giving the assets) will create this trust. The 3rd party supplemental needs trust does not have to pay back any government benefits.
The 3rd party supplemental needs trust can distribute any remaining trust assets to any other beneficiary the Grantor wishes, after the supplemental needs beneficiary passes away.
There are 2 types of Medicaid that are generally used in Elder Law – Community Medicaid and Nursing Home Medicaid. Both have different rules and restrictions.
Community Medicaid is used when the applicant is able to stay at home but needs help
Guardianships Services We Specialize In