Special Needs Trust
If a person is receiving Medicaid (not Medicare) or SSI, that person (a special needs person) is only allowed to have a certain amount of assets to continue to receive those benefits.
If the special needs person should receive or inherit additional assets, it may put them over the amount they can have and may make them ineligible to continue receiving their benefits.
If your child or grandchild is a special needs person and you leave them assets upon your death by means of a Trust, Will, or even as a beneficiary of a life insurance policy, you may cause them to lose their benefits until the money you left them is completely spent. Only then will they be eligible to continue receiving their benefits.
Solution
The federal law governing Medicaid and SSI specifically permits a particular type of Trust to hold assets for the special needs person without stopping the receipt of the benefits. This Trust, known as a Special Needs Trust, allows the Trustee, who cannot be the special needs person, to provide for the needs of the special needs person over and above the items paid for by Medicaid.