The Disabled Child Exemption – Protecting Your Assets When Illness Strikes
Watching someone you love struggle to regain the energy and strength they relied on for decades is an experience not soon forgotten. Protecting them requires more than basic day-to-day advocacy. Planning for long term care takes into account a person’s health and their financial resources. For those who are married, Medicaid offers spousal protections and exemptions.
If single or widowed there are other options. Many families have members that have been awarded Social Security Disability. A disabled adult child is allowed to be a recipient of a home and other financial assets from a parent without that parent being assessed a penalty under Institutional Medicaid.
The disabled child exemption is a favorable alternative to more advanced Medicaid planning involving property sales followed by Promissory Notes. A primary issue for single people who are experiencing a health crisis is the protection of their financial resources. Not having a spouse means there are fewer exempt transfer possibilities. Transfer penalties, even with advanced Medicaid Planning, can still eat up tens of thousands of dollars of penalties when a loved one stays at a Nursing Home.
Disabled adult children who are functional and competent have an advantage with this type of Medicaid Planning. They can execute legal documents and assist with the exempt transfers directly. If the disability is more pronounced, then the agents under a Power of Attorney or a Guardian may be required to authorize Medicaid transfers.
Families with multiple siblings, some of whom are not disabled, may have questions regarding the transfers and how they impact estate planning. The concept of “equal shares” works well in a Will context, but Medicaid Planning grants special status to disabled children and a family must understand the benefits of an exempt transfer.
Disabled adult children under 65 years of age will sometimes have a Special or Supplemental Need Trust (SNT) created for their benefit. Medicaid allows for non-homestead assets (bank accounts, brokerage accounts) to be transferred to a SNT for an under 65 year-old disabled adult child without a penalty. SNT’s have Trustees who are in control of the Trust assets, not the disabled child. A home cannot be transferred to a SNT under these circumstances and must be transferred directly to the disabled adult child. For home transfers, decision-making is in the hands of the disabled child which may or may not be problematic depending on the disability.
Medicaid has other exemptions that can be utilized to protect assets, but the disabled child exemption is important because it requires a deeper knowledge of the family. It is an exemption that offers value when there are no other avenues to save assets for a single or widowed individual fighting to maintain their health.
Consult with the professionals at Sloan and Feller today to see how you can plan ahead.