Case Study: A Trust for a Disabled Child

Margaret and her late husband, Sam, had always taken care of their daughter, Elizabeth. She is 45, has never worked, and has never left home. She is “developmentally disabled” and receives SSI (Supplemental Security Income). They had always worried about who would take care of her after they die. A few years ago, Margaret was diagnosed with dementia. Her health has deteriorated to the point that she can no longer live at home. Now she is living in a nursing home and is paying $6,000.00 per month out of savings. Margaret's other daughter, Jane, is helping out with her sister Elizabeth.  Jane is worried that there will not be any money left for the care of Elizabeth.

Jane is satisfied with the nursing home Margaret is in. The facility has a Medicaid bed available that Margaret could have if she were eligible. Medicaid would pay her bill. However, according to the information she got from the social worker, Margaret is $48,000.00 away from Medicaid eligibility. Jane wished there was a way to save the $48,000.00 for Elizabeth. There is. Jane can consult an Elder Law attorney to set up a “special needs trust” with the $48,000.00 to provide for Elizabeth. As soon as she does, Margaret will be eligible for Medicaid because the use of such a trust is not a divestment. Elizabeth won’t lose her benefits, and her security is assured.

Of course, all trusts must be reviewed for compliance with Medicaid rules. Also, failure to report assets is fraud, and when discovered, will cause loss of eligibility and repayment of benefits. Still, some people have questions about making gifts before or after entering a nursing home.