If you or a loved one has been diagnosed with a physical, mental or psychological disability you should consider whether a Special Needs Trust (SNT) should be a part of your estate plan. Whether you or a loved one, are presently receiving long-term nursing or custodial care, or might in the future, having a diagnosed disability increases a person’s chances of needing some form of long-term care.
According to a long-term care survey the average costs of care in Huntsville, Alabama for a semi-private nursing home room is $73,000.00 per year. That is slightly higher than the state median cost of $69,715 per year. For many Americans that is more than their annual income BEFORE taxes! In 2013, the median income for Alabamians was $41,385. This means that most families will not be able to private pay the annual cost for a loved one to receive custodial care in a semi-private nursing home room. If you do not like the sound of your loved one having a roommate at the nursing home the median cost of a private nursing home room in Alabama jumps to $76,267.00; in Huntsville: $79,570.00.
Accordingly, most families will require some form of public, private or charitable assistance to subsidize the cost of their loved one’s long-term care needs regardless of whether that loved one has been diagnosed with autism, Alzheimer’s, dementia, cerebral palsy, spina bifida or some other disability, illness or medical condition. For the most part, people must pay for their own long-term care until they run out of money. At such time, Medicaid, a joint federal-state program intended to subsidize the cost of medical expenses takes over if the disabled person or patient it receiving care in a nursing home facility. Medicaid is always the “payor of last resort.” Stated differently, Medicaid will only step in to pay the costs of long-term care when there are no other options.
Understanding Alabama Medicaid Benefit Requirements
There are several requirements one must meet before one can receive Medicaid benefits. The applicant must be (1) disabled or blind; (2) a U.S. Citizen or Lawful Resident Alien; and (3) an Alabama resident (to receive Alabama Medicaid assistance).
Further, the applicant must require skilled nursing care on a daily basis and such care can only reasonably be provided in a nursing care facility on an inpatient basis before Medicaid will provide financial assistance. Additionally, because Medicaid is considered a publicly available “means-tested benefit,” the applicant must not have more than $2,000.00 in countable assets. Countable assets include bank accounts, retirement investments, personal property & real property. In some instances, one’s home and automobile may be considered an exempt asset. In sum, Medicaid considered nearly everything one owns as a “countable asset” toward that $2,000.00 cap.
This $2,000 asset cap is important when considering whether a Special Needs Trust should be a part of your estate planning for yourself or a loved one who has been diagnosed with a disability. Federal and state law permit disabled persons and their loved ones to plan accordingly so that an inheritance, court settlement, or newly acquired wealth does not disqualify a disabled person from receiving Medicaid benefits.
Assets owned by a Trustee of a Supplemental Needs Trust (SNT) for the benefit of an individual with a disability are not countable for purposes of determining financial eligibility for certain publicly-means tested benefits such as Medicaid and certain Social Security Benefits. This specially designed trust, or SNT, provides a means of shielding one’s assets or wealth from Medicaid’s eligibility criteria.
For example, imagine a clear glass pitcher of delicious iced tea or lemonade sitting on a picnic table. Imagine further an opaque Red Solo® cup. When viewing the picnic table from a side angle one can easily see the iced tea or lemonade in the clear glass pitcher. However, upon pouring the iced tea or lemonade into the opaque Red Solo® cup one can no longer see the iced tea or lemonade from a side angle view. In very basic terms, this is how a Supplemental Needs Trust works for protecting a disabled person’s assets and maintaining Medicaid eligibility. Medicaid can see all of your wealth, property and assets in the glass pitcher, however, upon pouring those assets into the Red Solo® cup (i.e. the Special Needs Trust) Medicaid can no longer see them because those assets are not “deemed available” to the Medicaid applicant or eligible person; instead they are held by the SNT Trustee. Thus, the SNT provides a special fund from which an individual with special needs can pay for things that are not provided by Medicaid or other publicly available means-tested benefits.
There are several types of SNTs available, but not every SNT is appropriate for every person. Consulting with a special needs planning attorney who is well-versed in special needs and elder care planning law to determine whether a Supplemental Needs Trust is appropriate for your situation is imperative.
Often times, families think they do not have enough wealth or assets to warrant a Special Needs Trust. Nothing could be further from the truth! Remember, a Medicaid applicant cannot have more than $2,000.00 in countable assets to their name nor can they simply give away all of their property to another person to qualify for Medicaid. Medicaid imposes a five (5) year “look back” period to determine whether a Medicaid applicant made any “disqualifying transfers” of their property for purposes of obtaining or maintaining Medicaid eligibility. If done properly, however, a transfer of property to a carefully drafted SNT does not count as a “disqualifying transfer.”
While some people may believe consulting with a special needs planning attorney is too expensive or cost-prohibitive the cost of refusing to do so may prove financially catastrophic. Simply consider the average monthly cost of long-term care in a semi-private nursing home room: $6,083; that monthly payment is equivalent to multi-million dollar home mortgage payment.
Because of the sheer volume of information that families with a disabled person must consider, the legal professionals at Martinson & Beason, P.C. provide a free initial consultation to help educate families about the ins-and-outs of special needs planning to determine whether a SNT is right for them and their families. If you or a loved one would like more information about Special Needs Planning please contact us at 256-533-1667, or email us at firstname.lastname@example.org