If you receive Medi-Cal, or any other income-based government benefits, and you are expecting an inheritance, you should consider how to handle the money or property in a way that will not jeopardize your government benefits. Each state determines the specific qualifications for its own Medi-Cal program. However, most states provide coverage for adults with children below a certain income level. If you are a recipient that falls in that category, then depending on the amount of the inheritance you receive, you may become ineligible for Medi-Cal. If you have ever questioned, “how do I protect my inheritance?” — the answer is, by transferring the funds or assets to a Special Needs Trust.
How do I know if I actually need a special needs trust?
Not everyone looking to receive an inheritance will need a Special Needs Trust. It depends on the type of benefits you are receiving. With regards to Medi-Cal, in 2010 the Affordable Care Act established a national minimum eligibility level for Medi-Cal of 133% of the federal poverty level. This minimum became effective on January 1, 2014. So, the total income for a family of four would need to be below $31,720.50 a year.
Some other examples of benefit programs that would require a Special Need Trust, in order to maintain eligibility are Supplemental Security Income (SSI), Section 8 Housing, Supplemental Nutrition Assistance Program (Food Stamps), Residential Housing through the Division of Developmental Disabilities (DDD). To be sure that a Special Needs Trust is what you require, discuss your situation with an estate planning attorney.
Others who may need a Special Needs Trust
Even those individuals who are disabled, but still able to earn a living making them ineligible for government assistance, may still benefit from a special needs trust. Special Needs Trusts are commonly used for people with permanent or severely disabling medical conditions like blindness, paralysis. They are also used for individuals with permanent or severe mental conditions or developmental disabilities.
The reason special needs trusts are established for these individuals is they are usually unable to manage an inheritance in a prudent manner. Trusts created for these individuals are sometimes referred to as “spendthrift” trusts, as they are used to keep assets out of the hands of the beneficiary, and under the control of a trustee.
What type of special needs trust should I create?
When the amount of the inheritance exceeds $100,000, a standalone Special Needs Trust for that particular heir may be the best option. Professional trustees, experienced in managing special needs trusts, usually have substantial experience navigating the requirements of public assistance. If the amount of the inheritance is small, a Pooled Trust can be a good idea. With a pooled trust, your funds are combined with the funds of other beneficiaries for both investment and management purposes. This type of trust provides better investment options because the funds can be increased exponentially.
If you have questions regarding trusts and inheritances, or any other estate planning needs, please contact the Schomer Law Group either online or by calling us at (310) 337-7696.
Scott Schomer, Estate Planning Attorney
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