Like most other states, Michigan has a social safety net that aims to protect the most vulnerable members of society. The federal government also administers means-tested benefits to those who cannot work because of physical and mental impairments.
Qualifying for state and federal programs, such as Supplemental Security Income or Medicaid, typically requires having very few assets and income. Consequently, after individuals receive approvals for these programs, they typically take steps to keep their wealth as low as possible.
Your estate plan
If you have put off writing your estate plan until recently, you certainly are not alone. In fact, according to reporting from CNBC, almost 70% of Americans have not yet prepared estate plans. Still, you do not want to rush through the process.
Even though your gift may seem generous, giving cash or other assets to anyone who receives needs-based government assistance may be dangerous. That is, your gift may endanger your loved one’s public benefits, as it may cause him or her to have too many assets to remain eligible.
A special needs trust
If you want your loved one to have a better quality of life, it is advisable to consider forming a special needs trust. Because these trusts hold assets for the benefit of someone who has a disability, they usually do not interfere with public benefits.
While your relative cannot use funds in the special needs trust for all expenses, he or she can use them for many. Ultimately, if your loved one has access to both your special needs trust and to ongoing public benefits, he or she may have the necessary financial resources to thrive.