Should the Family of a Disabled Individual Design an Estate Plan? (Part
for families with disabled family members presents special concerns. In
addition to arranging for continued care and attention to the disabled
individual's needs, such as by designating a "standby guardian" or
through other arrangements, the family must make arrangements for the
individual's financial well-being.
The parents of a disabled child must ensure that the
receive adequate financial protection, probably for the child's entire
lifetime, while at the same time providing equitably for other family
members. The dependents of an individual disabled during adulthood may
also require financial help.
In many cases, to accomplish these goals it will be
access government entitlement benefits -- whether Social Security
disability or Supplemental Security Income, state supplemental
assistance programs, Medicare and Medicaid (Title XIX), or property tax
exemptions -- established to help those challenged by the unexpected
catastrophes that afflict human beings. How does one remain eligible
for these valuable resources without first becoming impoverished?
A "special needs trust" may form the most meaningful
part of the
family's estate plan. Because the trust assets are (1) provided by
someone other than the beneficiary, and (2) held in a trust for
"supplemental needs" only, if the trust is properly administered it
should not affect the disabled individual's eligibility for entitlement
benefits or be accessible to the individual's creditors, including the
A "special needs trust" will supplement, not
replace, entitlement benefits which may be available to the disabled
individual. If no benefits are available, the trust assets stand ready
to help. If the available benefits do not provide adequately for the
beneficiary's needs, the trust assets will fill in that gap. Even if
the available benefits adequately cover material needs, the trust
assets may be used to enrich the beneficiary's quality of life without
jeopardizing the much-needed benefits. Finally, to the extent that the
assets are not used during the beneficiary's lifetime, they may pass to
other family members.
What happens, however, if the disabled individual
has assets, but
these are inadequate to meet his or her needs? What if a will or a
trust names the individual without providing for a trust in the event
of disability? And what if the individual is about to receive a
settlement or award in a personal injury lawsuit?
In 1993, Congress gave disabled individuals and
their families a
breath of financial hope. By placing such an individual's property in a
special kind of special needs trust, a so-called "OBRA '93 Trust" or
"payback" trust, the individual will remain eligible for certain
important benefits, including Medicaid. The catch is that upon the
beneficiary's death, the Medicaid benefits must be repaid, with only
the balance passing to other family members. During the individual's
lifetime, however, the difference between an OBRA '93 Trust and no
trust can be the difference between having training and educational
opportunities, a computer, music, regular outings and a vacation, and
living a life of poverty or dependency. Since 1998, such trusts
can be established in Connecticut even when the individual is
legally incapable. However, the requirements for such trusts, and their
effect on the particular benefits received by the individual, can be
complicated. In Part 2, I will
discuss OBRA '93 Trusts in
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only provide general information, and will
not provide advice about a particular case without a formal engagement.
to me does not create
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