robert w. maher
Attorney-at-Law  · Partner with the Law Firm Dyer & Maher.
Special Needs and Medicaid

Chances are there is or will be someone in your family (child, grandchild, nephew, niece, parent, grandparent) who will need long-term help managing personal care and/or finances. Careful planning is necessary to craft a plan that will supplement government benefits that are worth preserving, is flexible enough to adjust to changes in future benefits, will preserve and expand assets, will make sure this person receives proper care, and may even save taxes. For a special needs trust, the proper funding, implementation and periodic review are especially critical because it may have to last a lifetime and often cannot be replaced. Once the plan is in place, it will be need to be managed. Who should do that?

Since no one person can meet all requirements, often the most effective solution is to divide the responsibilities into areas and have a team of professionals work together. For example: A Corporate Fiduciary Trustee (bank or trust company); a Care Manager; a Financial Advisor; a lawyer skilled in special needs matters keeps up with the ever-changing laws and regulations and provides wise counsel to the family and the other team members. Often a professional trustee will manage the funds, make distributions, prepare tax returns and keep the records.

Many parents think a sibling would be the best trustee, but this is rarely a good idea. Most individuals are just not prepared to handle the responsibilities. A professional trustee likely will, in the long run, be less expensive than the mistakes that are often made by a well-meaning but inexperienced family member. Also, some siblings may be torn between using the trust assets to provide for the beneficiary and preserving the assets, especially if they will inherit the assets after the beneficiary dies. It is usually better to have a professional as trustee, and have the family member be on the Trust Advisory Committee or to be the trust protector. (See more information in the section WILLS & TRUSTS).


Also, unlike Medicare, which is totally federal, Medicaid is a joint federal-state program. Each state operates its own Medicaid system, but this system must conform to federal guidelines in order for the state to receive federal money, which pays for about half the state's Medicaid costs. (The state picks up the rest of the tab.) This complicates matters, since the Medicaid eligibility rules are somewhat different from state to state and they keep changing. This most recently occurred with the passage of the Deficit Reduction Act of 2005 (the DRA), which significantly changed rules governing the treatment of asset transfers and homes of nursing home residents

In the absence of any other public program covering long-term care, Medicaid has become the default nursing home insurance of the middle class. Lacking access to alternatives such as paying privately or being covered by a long-term care insurance policy, most people pay out of their own pockets for long-term care until they become eligible for Medicaid.