Like most married people, you may want to ensure that your surviving spouse can afford the quality care he or she needs after you die while also maintaining some income stream. You must decide how to structure your estate plan to best meet these goals.
A special needs trust offers you one way of caring for your spouse while preserving his or her ability to receive governmental assistance.
Two types of special needs trusts
As explained by Forbes, you may create a self-settled special needs trust. Your adult child or another person may also create a third-party special needs trust.
The self-settled special needs trust
Creating your self-settled special needs trust starts with creating your will. Once you die, your assets flow into the trust, activating the trust. The distribution terms of the trust should ensure your spouse still qualifies to receive Supplemental Security Income and health care benefits from Medicaid.
The third-party special needs trust
This special needs trust allows you to name the beneficiary of your choice for any assets remaining in the trust when your spouse dies. The self-settled version requires remaining assets to repay the state for benefits received under Medicaid.
Gifting assets and the lookback period
A special needs trust protects your assets more than gifting items to your children or other parties. If you gift assets to your children, the value of those assets applies to any Medicaid or SSI eligibility determination for your spouse for a period of five years.
This information is not intended to provide legal advice but is instead meant to provide residents in Pennsylvania information about different types of special needs trusts and how they may provide income for a surviving spouse.