Certain situations require different approaches. Choosing one of these strategies is dependent upon the needs of the individual applicant, the amount of excess assets, the amount of lead time prior to anticipated need to apply for benefits, and the longer-term needs of the elderly or disabled applicant. These are not cookie cutter, everyone should do these things, strategies and none of these should be undertaken without the advice and counsel of an attorney that works regularly in this area.
Special Needs Trusts and Pooled Special Needs Trusts – These are both creatures of Federal and Minnesota law and regulations. These trusts are able to hold excess assets for the benefit of the applicant, without making them ineligible for government benefits. The trust’s assets are available for the applicant/beneficiary’s sole benefit for the balance of their life. The goods and services purchased by the trust must not substitute themselves for goods and services provided by the benefits that the applicant/beneficiary is or will be receiving from the government. Once the individual is receiving benefits and they happen to be the recipient of a “windfall”, such as an insurance settlement, an inheritance, a lawsuit settlement, or the like, the “windfall” can be placed in the trust without affecting the continuing receipt of benefits. When the beneficiary dies, the State has a lien against the trust for the value of long term care benefits that the State paid on behalf of the beneficiary during their lifetime.
These trusts are primarily used when the applicant/beneficiary is applying for or receiving benefits from government programs that are “asset sensitive” and have specific limits for allowed assets. Typical programs include MN Medical Assistance for long term care services, SSI, HUD Section 8 housing, VA Aid & Attendance, and the variety of MN Waiver programs. Occasionally, they are used for SSDI (SSDI is not asset sensitive) recipients that need someone to control their access and use of assets.
Supplemental Needs Trusts – These trusts are typically used by individuals that are planning for the future needs of a disabled person, typically a child. The recipient must meet Social Security’s definition of being disabled at the time of the creation of the trust. The trustee is directed to use the money only to supplement government benefits that the recipient is receiving. When the recipient dies the remaining assets are not subject to liens of the State. The trust document directs the remaining assets to whomever the trust creators choose.
Medical Assistance Compliant Annuities – These are very specialized annuities that use excess assets to create an income stream for the spouse of an applicant/beneficiary of MN Medical Assistance EW/LTC benefits. They also may be used in specific circumstances in conjunction with a gifting strategy. There only a few insurance companies that write these types of annuities in Minnesota.
Gifting Strategies – The general rule for all but a few fact patterns is DO NOT MAKE GIFTS! That is good advice to follow, especially if you trying to DIY the MA eligibility roadway or the attorney that you are working with does not deal with MA on a regular basis. There are situations where the facts presented make gifting a viable option to consider but you must know the risks before going down the gifting path!
Reverse Mortgages – There are occasions where the biggest challenge in the path to MA eligibility is the cash flow problem that the spouse of the applicant/beneficiary faces with the loss of the applicant/beneficiary’s income. Under the right circumstances, reverse mortgages may be a good solution for the spouse.