Charlotte Edition


By James W. Mallonee

SPECIAL NEEDS TRUSTS: MEDICAID PLANNINGFrom time-to-time a client will ask how to protect family assets following their death when the beneficiary of their estate is either a present Medicaid or Supplementary Security Income (SSI) recipient or will need Medicaid later on in life due to some form of disability.

To be eligible for Medicaid, some basic factors must be met, including failure to function in day-to-day activities, monetary and income limits. To get a person qualified for Medicaid there are specific things a person can do to prepare for qualification, including transferring assets (between spouses), qualified income trusts and personalized services contracts to name a few. However, with some of these qualifying methods, re-payment to Medicaid may occur following the death of the Medicaid recipient. A special needs trust will avoid the repayment requirement and allow the remaining assets to be distributed to others.

A person who is currently receiving Supplementary Security Income (SSI) or Medicaid benefits can still receive those benefits while being a beneficiary of a Special Needs Trust. The assets making up the Special Needs Trusts can be from many forms including inheritance, settlements (injury or divorce) along with Pay On Death (POD) type financial accounts. Without a Special Needs Trust, the recipient may not continue to receive such benefits.

Since 2016, federal law reduced the age limit for persons who could establish a Special Needs Trust. Prior to 2016, only individuals over the age of 65 were allowed to establish a Special Needs Trust for themselves, but that has changed such that the disabled person may do so or another may on their behalf.

Some of the situations where this becomes beneficial is where a spouse has dementia and the other spouse is inflicted with a disease where there is a high probability of predeceasing the sick spouse.

Even if the sick spouse is currently in a nursing home receiving Medicaid benefits and the preservation of the family assets is desired, a Special Needs Trust can accommodate the asset preservation while allowing the sick spouse to live comfortably while maintaining their Medicaid and SSI benefits.

Another example would be when a child is disabled and is receiving SSI. Upon the death of the parent, the Medicaid and SSI benefits may cease due to the amount being inherited. A Special Needs Trust will preserve the SSI and Medicaid benefits while providing funds for those things to enrich the disabled persons life.

One of the things to be careful about when creating a Special Needs Trust is who will be its trustee. The trustee cannot be the beneficiary. It must be an independent person or entity who has knowledge in how to administer these types of trusts and work within Medicaid policies. This may include professional persons who do this for a living or a financial institution who have trust departments. NOTE: some financial institutions may have a minimum dollar amount before accepting the role of trustee.

Lastly, don’t be confused on the title to these types of trusts. The title Supplemental Needs Trusts and Special Needs Trusts are the same thing. What ever title is used, consider using this type of trust when the preservation of estate assets is desired and one of the beneficiaries is disabled; qualifying for Medicaid; or, is presently receiving Medicaid benefits.

If you have a family member who is disabled or is receiving Medicaid along with SSI benefits, talk to an attorney of your choice about preservation of assets upon your death. Your attorney will prepare a trust designed to enrich the disabled beneficiary’s life while providing for future generations following such beneficiary’s death.

James W. Mallonee (Jim Mallonee) is a graduate with a B.A. degree from the University of South Florida and a Master of Science degree from Rollins College in Winter Park, Florida. He obtained his Juris Doctorate from the University of the Pacific, McGeorge School of Law in Sacramento, California. Prior to returning to Florida to practice law, Mr. Mallonee was employed by Intel Corporation for 22 years in such locations as New Jersey, Florida and California.

In addition to being a member of the Florida Bar since 2003, Mr. Mallonee serves on the Charlotte Community Foundation Committee for asset allocation and teaches Business Law at State College of Florida. Mr. Mallonee is also on the Board of Directors for the Military Heritage Museum located in Charlotte County, Florida.

His firm practices law in the following areas: Probate, Wills & Trusts, Guardianships, and Litigation in the areas of Real Estate, Guardianships and Estates. The firm has two locations in Venice and Port Charlotte, Florida.

James W. Mallonee, P.A.
946 Tamiami Trail, #206
Port Charlotte, FL 33953
(941) 206-2223
Facsimile (941) 206-2224

871 Venetia Bay Blvd., #225
Venice, FL 34285
(941) 207-2223

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