Families are often sandwiched between the long-term care needs of parents and grandparents and the health care, income, housing, and other needs of children with disabilities. As the parents of a child with disabilities themselves age, they need to develop a plan to meet the needs of their child. Similarly, potential nursing home and other long-term care costs may prevent grandparents and other aging family members from providing for younger family members with disabilities.
Parents need to consider where their child might live and what supports would need to be in place to make independent living possible. Depending on the extent of disability, the parents may need to explore group homes, assisted living facilities, and nursing homes. An attorney with experience in helping special needs families can help identify and assess options as well as adjust the housing plan as the child’s needs evolve. An actively involved professional can help accomplish the parents’ goals — even after their deaths.
The resources of many children with disabilities are insufficient to meet their health care, income, and shelter needs. Such children depend on government programs like Medicaid, Supplemental Security Income (SSI), and subsidized housing. To qualify for such programs, the child needs to meet the particular income and asset standards of the program. For example, in most states, the child cannot have more than $2,000.00 of countable resources to qualify for Medicaid to pay the child’s medical expenses. In addition to resource restrictions, states also impose income limitations, though the precise numbers vary.
But what about parents, grandparents or other family members facing their own long-term care needs? Though Medicaid law generally penalizes transfers of assets made up to five years before an application for assistance, there are several different ways that gifts can be made to (or into a trust for) a family member with a disability. The rules are more generous for parents seeking to make transfers, but there are options available to grandparents and others, as well.
If a grandparent (or other older family member) needs long-term care, the cost can quickly exhaust his or her life savings. Alternatively, the older family member can earmark those life savings for a grandchild or other relative with disabilities. Medicaid explicitly permits the grandparent to place his or her savings into a specific type of trust for that grandchild. The section of the Medicaid law approving transfers to benefit an individual with a disability first requires that the beneficiary must be under age 65. If that age limitation is met, transfers may be made into either (1) a trust with a “pay-back” provision effective at the beneficiary’s death, or (2) a pooled trust, operated by a non-profit that will retain some or all of the funds for the benefit of others after the beneficiary’s death. This type of transfer by a grandparent to an appropriate special needs trust (or pooled trust) for a grandchild with a disability can accomplish two goals simultaneously: the grandparent can immediately qualify for Medicaid assistance with long-term care costs, and the grandchild can receive benefits from family wealth without endangering his or her own public benefits.
The parents of a child with disabilities have two additional choices. As with grandparents, the parent who seeks assistance with his or her own long-term care can place life savings into a “payback” or pooled trust for his or her child with a disability. Alternatively, however, a parent can also make an outright gift of any amount of funds to his or her child with disabilities, without the transfer adversely affecting the parents’ own eligibility for Medicaid. An outright gift, however, is usually appropriate only if the child is not receiving government benefits, and is able to manage the funds directly.
If the child with a disability is receiving government benefits, Medicaid also permits the parent to place his or her assets into a “sole benefit” trust for the child. Most states require that the payments from the trust be made based on the beneficiary’s life expectancy; that can mean that more must be paid out each year than the parent would prefer. Still, to the parent facing his or her own long-term care costs, the end result can be much more attractive. If money remains in the trust at the child’s death, the remaining assets can be distributed to other family members rather than paid back to the state Medicaid agency.
All of this assumes that parents or grandparents are seeking to transfer assets while they are still alive, in order to qualify themselves for Medicaid assistance. If they are planning for their own deaths, and especially if long-term care costs are not a major concern, both parents and grandparents can leave whatever part of their estate they wish to a purely discretionary special needs trust for the benefit of the child. Since the child with a disability has no legal right to force the trustee to spend anything on his or her behalf, neither Medicaid nor SSI considers the trust when determining the child’s eligibility. On the death of the child with a disability, whatever is left in the special needs trust can go to whomever the parent or grandparent designates.
Parents and grandparents have numerous options to plan for long-term care in ways that preserve funds for a child with disabilities. The most appropriate option depends on the financial, family, and health circumstances of the parent or grandparent and the disability, support system, and government benefit status of the child. An attorney experienced in elder law and special needs law can provide the information and assistance needed to best meet the needs of the child and parent or grandparent.
About this Newsletter: We hope you find this newsletter useful and informative, but it is not the same as legal counsel. A free newsletter is ultimately worth everything it costs you; you rely on it at your own risk. Good legal advice includes a review of all of the facts of your situation, including many that may at first blush seem to you not to matter. The plan it generates is sensitive to your goals and wishes while taking into account a whole panoply of laws, rules and practices, many not published. That is what The Special Needs Alliance is all about. Contact information for a member in your state may be obtained by calling toll-free (877) 572-8472, or by visiting the Special Needs Alliance online.