Will your estate plan affect the beneficiary’s Medicaid?

On Behalf of | Mar 11, 2021 | Estate Planning |

Medicaid is an important health insurance program that provides benefits to millions of low-income Americans. If you have a loved one who has a disability that interferes with his or her ability to work, Medicaid may pay for checkups, medical care and medications.

To qualify for Medicaid, your relative must have limited income and assets. When you are planning your estate, giving assets to your loved one may push him or her over the asset threshold. If you do not want your estate plan to interfere with your relative’s Medicaid benefits, you may want to set up a unique type of trust.

The special needs trust

A special needs trust holds assets for the benefit of your loved one without transferring ownership to him or her. Even though your relative has access to disbursements from the trust, he or she continues to be eligible for Medicaid benefits.

Supplemental medical expenses

When tapping into the special needs trust, your loved one must not use disbursements from the trust for the same medical expenses that Medicaid covers. Regular medical appointments, follow-up care, diagnostics and prescription medication are probably off limits.

Still, your relative likely may use disbursements on supplemental medical expenses without losing Medicaid eligibility. These may include any of the following:

  • Copays and uncovered medical expenses
  • Wheelchairs, hearing aids and other medical devices
  • Medical-related home modifications
  • Rehabilitation and therapy

The special needs trustee who oversees the trust must approve all disbursements. Consequently, when choosing your trustee, you should be certain the individual understands Medicaid rules and your loved one’s medical needs.