If you’ve taken steps to get the best possible long-term medical care for a loved one with special needs, you also need to think about protecting your assets from Medicaid. This is because the Medicaid standard to establish need essentially requires the recipient to be flat broke.

If you leave an inheritance for that loved one, it could be at risk of a Medicaid recoupment.

This post will talk about some of the unique considerations you’ll want to give to your estate planning to prevent losing your assets to Medicaid.

In order to qualify for federal, state and local benefits, your special needs loved one is required to establish financial need. The standard for financial need is essentially the poverty level. Considering the overwhelming costs of long-term ongoing medical care, this isn’t a difficult standard to meet.

However, government agencies are required by law to look at the individual’s overall ability to pay for their own care. If you leave assets or an estate to your loved one after your death, those assets could be at risk of recoupment by Medicaid, also known as recovery.

Specifically, the federal Medicaid recovery law requires states to attempt to recover costs for medical assistance received from any of the following:

  • Nursing home or long-term institutional services
  • Home-based or community-based services
  • Hospital or prescription drug services provided while the beneficiary received nursing facility services, home-based services or community-based services
  • Any other items covered by the state’s Medicaid plan

According to the Department of Health and Human Services:

“At a minimum, states must recover from assets that pass through probate (which is governed by state law). At a maximum, states may recover any assets of the deceased recipient.”

What does this mean to you and your special needs loved one? Simply put, it means your assets can be recovered by Medicaid after your death to repay benefits your loved one received.


The good news is you can protect those assets with strategic estate planning. In fact, this is one of my areas of expertise, and a personal favorite area of the law.

One of the first steps in protecting your estate from a Medicaid recoupment after your death is to set up a Special Needs Trust. In doing this, you remove your loved one from any control over the assets. Instead, those assets are held and controlled by the trust and as a result, your loved one can continue to collect government benefits throughout his or her lifetime.

A Special Needs Trust (SNT) is a type of trust that preserves your loved one’s eligibility for government benefits such as Medicaid or Supplemental Security Income while protecting the assets held in the trust. Because the beneficiary of these benefits doesn’t personally own any of the assets of the trust, he or she will remain eligible for benefits.

Instead, the trustee of the assets may supplement the beneficiary’s benefits but not replace them. Examples of supplemental needs include costs for caregivers, companions and medical expenses Medicare or Medicaid do not cover.

There are some restrictions to how the assets of the trust may be used to benefit your loved one. For example, the assets cannot be given to your loved one as cash or used to provide food or shelter.

Creating an SNT is not complicated, but there is a right way to do it so the trust assets can benefit your special needs loved one under the law. Structured correctly, the assets in the trust will be protected from any Medicaid recovery.

If you would like to talk with me about creating an SNT to protect your assets, please contact me by phone or email. We will discuss your situation in detail and create a strategy that provides the very best possible care for your loved one while also protecting your estate.

Law Offices of Paula Hannah, PLC can help you put together legal documents to protect your special needs’ child.

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