By WESLEY E. WRIGHT and MOLLY DEAR ABSHIRE
Wright Abshire
(originally published in the Houston Chronicle 50 Plus Section, Friday, February 25, 2000)

In many situations, families have a desire to provide testamentary transfers for their loved ones, including aging parents, elderly spouses and an incapacitated child or sibling. Because of the high cost of health care, it has become increasingly popular to plan for the basic maintenance of an incapacitated person through governmental programs, like Medicaid, while establishing a system that contributes to the special, nonsupport needs of the loved one.

Medicaid is a federal government health care program that provides medical care and services to qualifying persons, but limits the assets and income that a person may have to qualify.

However, a person may qualify for Medicaid and be the beneficiary of a special trust established for his or her supplemental needs.

A testamentary supplemental needs trust, established in an individual's Last Will and Testament, comes into effect upon the death of the "testator" or the will's creator.

The disabled loved one for whom the trust is created is called the "beneficiary."

The "trustee" is the individual that the testator names in the will to be the person in charge of the trust after the testator's death and during the beneficiary's lifetime.

A special testamentary supplemental needs trust allows individuals to leave assets for their intended beneficiary in their will, without causing those assets to make the beneficiary ineligible for Medicaid benefits.

This is important to consider when a disabled beneficiary is either living in a skilled nursing facility, or is likely to have need for long-term care in the foreseeable future.

Testamentary supplemental needs trusts insulate assets from being counted against the beneficiary for Medicaid qualification purposes, while still making a difference in the beneficiary's quality of life. The purpose of such trusts is to provide for needs of the beneficiary not met by public benefits programs.

The trust's assets can be used to purchase special equipment, therapies and treatments not covered by Medicaid, as well as entertainment items and other things that enhance the beneficiary's quality of life. Books, computers, educational materials, hobby equipment and movies fall into this category.

In order for the trust's beneficiary to maintain Medicaid eligibility, the assets may not be used to pay for the beneficiary's basic living expenses and medical care that are covered by Medicaid.

Trustees should be chosen with care because their discretion is important to the beneficiary in maintaining his or her governmental benefits.

Since the trust will not come into existence until after the testator's death, the testator will not have a chance to review the trustee's performance.

It is important for the trustee to consult with an attorney familiar with the rules governing the specific program from which the trust beneficiary receives assistance, so that distributions are made in accordance with those rules.

Testamentary supplemental needs trusts can benefit clients who have family members or other loved ones receiving or who hope to qualify for Medicaid.

In addition, these special trusts can help persons use assets to the best advantage when they wish for those assets to benefit a disabled loved one upon death.