Page 52 - Senior Link Magazine Spring 2021- Online Magazine

SENIOR RESOURCES

Reforming a Will TO KEEP A BENEFICIARY FROM

LOSING MEDICAID OR SUPPLEMENTAL

by Lee Franks SECURITY INCOME OR BOTH

ccasionally, someone, Dianne for example, will come must be used to reimburse certain Medicaid benefits the
to me with the following story. Her widowed sister, beneficiary received during his or her life.
OGaye, had one child, Leonard, now 52 years old
and disabled from birth. Aside from Gaye’s care, Leonard Since September 2015, Sections 255.451-455 of the Texas
received $794 per month through the Social Security’s Estates Code allow the personal representative of the estate
Supplemental Security Income or SSI program, which also of a deceased person to ask the probate court to modify or
qualifies him for extensive medical assistance through reform a will to prevent a beneficiary from losing public
Medicaid. Now Gaye has died, and her will left everything benefits. The statute does not specify what modifications
to her husband, Jake, who predeceased her, and then to or reformations the court should undertake, but the
Leonard. Although Gaye did not make much money at wording of the statute is broad enough to include creating
any time in her life, she had scrimped and saved to pay for a testamentary SNT or simply directing a distribution
her home and accumulate about $150,000 in savings, all of intended for a disabled beneficiary, such as Leonard, into an
which now goes to Leonard. Dianne has now learned that SNT created by someone else, perhaps Dianne in our story.
both SSI and Medicaid have a $2,000 countable resource Because either a testamentary SNT or an SNT created by
limit, and Leonard soon will lose both supports until his Dianne would be a third party SNT, neither would have to
inheritance is spent or otherwise made ‘uncountable’. include a claw back provision for Medicaid. A more subtle
outcome of Sections 255.451-455 is that this statute is not
If Gaye had known it, she could have created a limited to beneficiaries under the age of 65; therefore, even
supplemental needs trust, or SNT, either while she was still a person who was too old to take advantage of a d4A SNT
alive (an inter vivos SNT) or in her will (a testamentary might enjoy the benefits of modifying or reforming a will
SNT), which would have made her property available to under this new section of the Estates Code.
Leonard for his entire life, and then anything left after
Leonard died would pass on to other beneficiaries
of Gaye’s choosing. In fact, any SNT, created by
someone other than the beneficiary and funded with
someone else’s property, would work in the same
way. Attorneys specializing in this area of law call
these trusts “third party SNTs”.
At this point in the story, Leonard or his agent and
aunt, Dianne, could spend the money on just about
anything so long as the money is spent on him. He
can keep the house, since neither SSI nor Medicaid
count its value against the $2,000 limit. He could buy
a car, which also is not countable, but he does not
drive, and he has no particular needs that would make
a van or other specialized transport useful. He could
purchase personal items, such as clothes, furniture,
appliances, or even a pre-need funeral contract, but
spending so much money on mere consumer goods
seems a waste.
Until September 1, 2015, Leonard’s only other option
would have been a self-settled supplemental needs
trust created pursuant to 42 USC 1396(p)(d)(4)(A).
People familiar with these trusts commonly refer to
them as d4A trusts. Only disabled persons under
the age of 65 may transfer any amount of money
or property into such a trust without jeopardizing
their SSI or Medicaid, but among the required trust
provisions is a ‘claw back’ for the state or states that
provided assistance to Leonard. Essentially, anything
remaining in a d4A trust when the beneficiary dies

52 Lubbock Senior Link