By Jehan Crump-Gibson
Series: Matters of Life and Death
Some of us have loved ones living with a disability who receive government benefits like Medicaid and Supplemental Security Income (SSI). While SSI is important for food, shelter and clothing, Medicaid benefits are critical for medical and dental coverage for these loved ones. We certainly don’t want them to lose those essential benefits just because they receive an inheritance or other assets. The good news is that they don’t have to!
The law allows us to create special needs trusts (SNT) to hold funds for a person with a disability without putting their government benefits at risk. The SNT allows funds to be used for “supplemental needs.”
Supplemental needs are things that are not covered by government benefits but improve a person’s quality of life. These things can include medical and dental care beyond what Medicaid covers, recreational and travel activities, entertainment, therapies, specialized equipment, assistive technology, education, transportation costs and more. The SNT ensures ongoing support and care for a beneficiary living with a disability long after their loved one is gone.
Let’s take Barbara, who is only 43 years old. She has a son, Billy, who was diagnosed with Asperger Syndrome as a child. He is now 20 years old and lives with Barbara full-time. Barbara’s husband and Billy’s father passed away years ago.
Barbara ensures that Billy participates in behavior therapy, family therapy and takes an art class at community college. She was able to arrange for accommodations at the school, so that he could participate in an activity that make him happy. He loves art! She takes him on a trip at least twice a year to somewhere near an ocean or lake because he loves water.
Billy receives Medicaid benefits to cover his healthcare expenses; however, Barbara pays for the behavior therapy out of pocket, as Medicaid does not cover it. Barbara sacrifices for Billy to participate in this specific therapy, because he does well with it. She can see a significant positive difference in his behavior.
One day, Barbara finds out that she has an inoperable brain tumor. As she prepares for the worst, Barbara talks to her younger sister Angie about caring for Billy after she is gone. She isn’t rich but has a home, modest checking and savings accounts, a 401(k) and a life insurance policy with a $100,000 death benefit.
Barbara never updated the beneficiary on these assets after Billy’s father passed away, so he is still named. Barbara recalls that someone at her church mentioned adding Billy to the property deed in case something happens to her, so that he’ll “always have somewhere to live.” Barbara goes downtown and files a quit claim deed with the county, doing just that. She never went to see an attorney and did not do any estate planning. Three months later, Barbara passes away.
Barbara’s sister Angie discovers that Barbara left the bank accounts in her name alone, so she must go to probate court to access those funds for Billy. He has therapy sessions coming up that require payment and tuition is due for another art class.
She schedules a consultation with a probate lawyer. The probate lawyer tells Angie that the bank accounts are the simplest of the issues. As Billy’s father is no longer living, Billy stands to inherit the 401(k) and the life insurance policy. He will also inherit the cash in the bank accounts and he was added to the house. If the house is sold, Billy will receive the proceeds from that sale directly.
As it stands, he will undoubtedly be disqualified from receiving his Medicaid benefits —meaning his medical and dental coverage. Now, Angie will have to petition the probate court for conservatorship, to get legal authority to make financial decisions for Billy. Once the conservatorship is set up, a petition will have to be filed asking the court to allow Angie to set up the same special needs trust Barbara could have set up when she was living.
The assets that Barbara left behind will need to be placed in that trust. Angie feels truly discouraged because it sounds like such a tedious process; but she has no choice but to spend the money and time to make it happen. Sure, Billy could simply inherit all the assets and get disqualified from Medicaid.
However, he is only 20 years old and with the staggering costs of healthcare, this simply isn’t a good idea. Those assets are not enough to provide lifetime healthcare for Billy. They certainly are not enough to provide supplemental needs for Billy’s accustomed manner of living, which is crucial now that his mother is gone.
If only Barbara had visited with a lawyer and planned before or as soon as she was diagnosed with her terminal condition…
The moral of the story is that you should not leave things to chance. No one has control over when and how they will pass away. This is why you plan for the unexpected. Contact an experienced estate planning attorney today!
Attorney Jehan Crump-Gibson is the Co-Founder and Managing Partner at Great Lakes Legal Group PLLC, where she concentrates her practice in probate and estate planning, business and real estate matters. Great Lakes Legal Group is a growing black-owned law firm serving clients throughout the state of Michigan and in federal courts across the country. Jehan has served as Faculty for the National Business Institute and the Institute of Continuing Legal Education concerning business, probate and estate planning matters. She is a legal analyst with Fox2 Detroit’s The Noon and the author of the book A Matter of Life and Death.
