Medicaid Myths
Many people mistakenly believe that any indigent person is eligible for Medicaid. The truth is a penniless but able-bodied 64 year old may not qualify. In addition to a means test, recipients must fall into one of several qualifying categories - the blind, the disabled, those over 65, SSI recipients, some former SSI recipients, and a few others. Many Medicaid recipients are indigent because of their qualifying disability. But Medicaid recipients are permitted a number of "excluded resources," most significally a homestead, a vehicle, and household and personal goods.
Medicaid law is regulatory, subject to rapid change, and under constant scrutiny, as both federal and state governments look for ways to reduce expenses. One Medicaid fact is that a sudden or unexpected receipt of countable resources - generally, a settlement from a lawsuit, or an inheritance from a relative - can cause an otherwise uninsurable person to lose his Medicaid benefits. People get in accidents of every type on any given day. Family members die intestate owning assets that devolve automatically under the intestacy laws to covered individuals. It is also not uncommon that a person of means - perhaps a grandparent - has a family member suffering a congenital birth defect, or a psychiatric illness severe enough to preclude employment. Special needs planning is required to prevent forfeiture of benefits.
Medicaid law is regulatory, subject to rapid change, and under constant scrutiny, as both federal and state governments look for ways to reduce expenses. One Medicaid fact is that a sudden or unexpected receipt of countable resources - generally, a settlement from a lawsuit, or an inheritance from a relative - can cause an otherwise uninsurable person to lose his Medicaid benefits. People get in accidents of every type on any given day. Family members die intestate owning assets that devolve automatically under the intestacy laws to covered individuals. It is also not uncommon that a person of means - perhaps a grandparent - has a family member suffering a congenital birth defect, or a psychiatric illness severe enough to preclude employment. Special needs planning is required to prevent forfeiture of benefits.
First Party Special Needs Trusts
In addition to a place to live, a car to drive to doctor appointments, and other limited listed exclusions, trusts can be established under 42 U.S.C.A. 1396p(d)(4) with the individual's own assets, and be excluded from countable resources. The most commonly used of these is a special needs trust established when a lump sum is about to be received on behalf of a Medicaid recipient. This trust can supplement government benefits, without disqualifying the recipient. The trust must be for the benefit of a disabled individual under age 65, and can be established by the individual himself, if he has sufficient capacity, or by a parent, grandparent, legal guardian, or by the court. At death, the state must receive reimbursement of the total amount of Medicaid benefits paid, up to the value of any remaining property in the trust at the death of the individual. Any excess property remaining above and beyond the benefits paid can be distributed according to the individual's Will.
Third Party Supplemental Needs Trusts
A trust created and funded by a third party may also be excluded from countable resources, as long as the beneficiary has no legal rights to use the property for his own support and maintenance. There is currently no regulatory pay-back requirement, but the trust must be carefully drawn to meet the requirements of the regulations. Supplemental needs trusts can be included in a Will, and some planners suggest that any testamentary gifts should include contingent supplemental needs trust language, since the future is not certain for any of us. At a minimium, if one of your intended beneficiaries is disabled, you should explore supplemental needs planning to preserve existing benefits.