Medicaid & Special Needs Planning

A special needs trust is a special trust that allocates trust assets for the benefit of a person who has special needs and is (or may likely be) Medicaid eligible.  Special Needs Trusts may take many forms. For estate planning purposes, Special Needs Trusts generally are drafted so that the special needs beneficiary may receive distributions of trust income and trust principal without having the trust principal or trust income being considered countable (as assets or income) for Medicaid eligibility purposes. 

Special needs trusts are not overly complicated to draft. Well drafted asset protected trusts often have dynastic provisions that protect beneficiaries’ who may possibly Medicaid eligibility even when Medicaid doesn't appear to be an immediate issue. If you are interested in estate planning for a special needs beneficiary, or have questions about special needs trusts, feel welcome to contact the firm. 

Note Special Needs Trusts frequently are referred to as Supplemental Needs Trusts when a trust grantor creates the trust for the benefit of a third party special needs beneficiary (as opposed to the grantor being a special needs beneficiary) 

For Medicaid purposes, and for certain Medicaid applicants, the home can be an excluded resource. As an excluded resource, the home will not be counted for Medicaid eligibility purposes.

A home may be an excluded resource if it serves as the person's principal place of residence.

To be a principal place of residence, the Medicaid applicant must consider the place to be their established or principal home. Additionally, if they are absent from the place they consider to be their established or principal home, they must intend to return to that place as their principal place of residence.

What land is excluded when the home is an excluded resource?

The home includes the lot it sits on and any contiguous property. However the the contingent property mayn't exceed $5000 in value

(FOR A MORE DETAILED ANALYSIS ON WHAT LAND IS EXCLUDED WITH THE HOME, CLICK HERE).

The Medicaid Manual at M1130.100(B) Expresses the following with regard to determining the extent of the boundaries for the lot for which the home sits:

The home exclusion applies to the plot of land on which the home is located.

The excluded home lot size may vary according to the locality's building

requirements.

For localities with set minimum building lot size use the lesser of:

• the plat;

• the survey; or

• the locality's minimum size for a building lot.

For localities with no minimum building lot requirements, use the lesser of:

• the plat;

• the survey; or

• one acre.

If you have any questions, please give us a call. We welcome questions and want to talk with you or your advisor.

What if you own property contiguous to the property that your home sits on (the lot for Medicaid purposes)?

The general rule is that you can exclude $5,000 worth of property contiguous to the lot for which your home sits on. However, if the contiguous property is essential to the operation of the home, then it may be excluded from the Medicaid analysis also.

The Virginia Medicaid Manual provides the following:

The home exclusion applies to land adjoining the home plot if not completely separated from it by land in which neither the individual nor his or her spouse has an ownership interest. Five thousand ($5,000) of assessed value of land contiguous to the home lot can be included in the home exclusion.

For the purposes of the home exclusion, easements and public rights of way (utility lines, roads, etc.) do not separate other land from the home plot.

Contiguous Property Essential to the Operation of the Home

The equity value of countable contiguous property may cause resources to

Exceed the maximum limit. In these cases, reevaluate the home property

Applying the definition of the home used in the State Plan for Medical

Assistance in Virginia in effect on January 1, 1972. At that time a home

means the house and lot used as the principal residence and all contiguous

property essential to the operation of the home regardless of value.

Property essential to the operation of the home means:

a. land used for regular production of any food/goods for the household's

consumption only, including:

• vegetable gardens;

• pastureland for livestock raised for milk or meat;

• land to raise chickens, pigs, etc;

• outbuildings used to process and/or store any of the above.

The amount of land necessary to support animals named above is

established by the local extension service. However, only actual land

being used to support the animals will be allowed.

b. driveways connecting the home site to public roadways.

c. land necessary to the home site to meet local zoning requirements (e.g.

building site, mobile home sites, road frontage, distance from road,

etc.).

d. land necessary for compliance with state local health requirements (e.g.,

distance between home and septic tank(s));

e. water supply for the household.

f. existing burial plots.

g. outbuildings used in connection with dwelling, such as garages or tool

sheds

CAUTION: PLEASE NOTE THAT YOUR HOME MUST BE A PRINCIPAL PLACE OF RESIDENCE FOR IT TO BE EXCLUDED.

(FOR MORE ON THE HOME/ PRINCIPAL PLACE OF RESIDENCE EXCLUSION CLICK HERE)

(FOR MORE ON THE MOBILE HOME RULE CLICK HERE) 

If you have any questions, please give us a call. We welcome questions and want to talk with you or your advisor.

What if you own the lot or land your home sits on, but you don't own the home?

It isn't necessary for you to own the home for you to exclude the lot for which the home sits. You still may be able to exclude the lot and contiguous property for your home.

What is a home? How may it be defined for Medicaid purposes? It’s the particular place where you live and rest. In a romanticized ideal, it should be your place of refuge or sanctuary. However you describe it, being a title owner is not a requirement.

The important distinction is between owning and possession. While you may need to have title to a home (house/ mobile home/ or boat) to be the owner, you don't need be the owner to possess (or have) a home.

Consider the following example:

I.e., you live in a mobile home that is located on a lot that you own. If the mobile home meets the definition of your home, then the lot and continuous property should be excluded.

CAUTION: PLEASE NOTE THAT YOUR HOME MUST BE A PRINCIPAL PLACE OF RESIDENCE FOR IT TO BE EXCLUDED.

(FOR MORE ON THE HOME/ PRINCIPAL PLACE OF RESIDENCE EXCLUSION CLICK HERE; FOR MORE ON THE CONTIGUOUS PROPERTY EXCLUSION CLICK HERE) 

If you have any questions, please give us a call. We welcome questions and want to talk with you or your advisor.

Your disabled child can be disqualified from governmental programs and required to exhaust (or spend down) his or her inheritance if you fail to properly plan. Parents of disabled persons have many significant parental responsibilities and proper estate planning is especially important.

Government programs provide basic assistance. Unfortunately these programs can have their budgets cut, benefits reduced, qualifications tightened, or they can be eliminated entirely. Supplemental Security Income (SSI) and Medicaid are two of the more well known and important programs. But disabled persons deserve more care than these programs provide. They deserve companionship, recreation, transportation, proper dental care, and much more.

Many parents erroneously believe that they must disinherit their disabled child. Special trusts can keep your child eligible and allow him or her to enjoy his or her inheritance. You can use a Supplemental Needs Trust to provide for your disabled child’s supplemental needs (the needs not provided by government programs) without making the child ineligible.

The cost of providing assistance to disabled individuals can be astronomical. Very few people have the money to provide their child with a lifetime of care. A Supplemental Needs Trust is a fantastic estate planning tool that allows the child to benefit from both government programs and their inheritance. Estate planning professionals can create a special needs trust tailored to your child's needs, your estate's value, and the dispositional scheme you desire. Contact us today and let a knowledgeable professional go to work for you.

Authored by Luke Anthony Lenzi, Esq.

If your minor child receives his or her inheritance outright then it's likely to be squandered. Your child depends on you for his or her support. His or her needs will not end if you die. They will become more dramatic. It’s critical that you plan for the possibility that you and your spouse may die before your child becomes an adult.

Minors cannot manage their property under Virginia law. The court may appoint a guardian of the minor's estate (hereinafter referred to as a conservator or conservatorship) to manage the property. Unfortunately conservatorship is inflexible, cumbersome, and unnecessarily expensive.

Wasteful conservatorship proceedings are a drop in the bucket when compared to the losses that can result when the conservatorship ends. Very few adults can prudently manage their finances. A spendthrift child who has suffered the emotional, psychological, and educational consequences of losing both parents is particularly unsuited.

The additional responsibilities can negatively affect his or her academic career. It’s hard enough balancing a full semester's work load. It’s even more difficult when you have to manage real estate and investments, balance a check book, and ensure bills are paid on time.

A trust can provide for the child’s support, provide incentives for the child to pursue a higher education, protect the child from his or her own inexperience, and shield the inheritance from creditors, such as plaintiffs, divorcing spouses, and the government. Determine what your estate would be worth if you and your spouse died tomorrow (don’t forget to include the life insurance). Then ask yourself how different your life would have been if you had received that same amount when you reached 30 years of age. It’s worth taking the time to plan. Contact us today and let a knowledgeable estate planning professional go to work for you.

Authored by Luke Anthony Lenzi, Esq.