The concept of having too much money is foreign to almost all of us.
But if you receive needs-based government benefits like Medicaid, Family Care, IRIS, SSI, or other programs, having money can be an issue.
For parents and grandparents of program recipients, it can be a struggle to decide whether to include the recipient in their estate plan. Recipients can also find themselves in a pinch if they receive a gift, inheritance, or back-pay from the government that pushes them over their asset limit and jeopardizes their benefits.
Federal law recognizes the concept of a “pooled” trust. Pooled trusts hold onto funds for disabled beneficiaries and the funds held in the trust do not count against that person’s asset threshold. There are dozens of pooled trust providers throughout the United States.
WisPACT, Inc. is a Madison based non-profit created as a pooled trust for Wisconsin residents.
Which WisPACT Trust is Right for You?
There are two major types of WisPACT trusts. If a person has assets in their own name that they want to protect, a first party or WisPACT Trust I is the best choice. If a person has assets that they want to set aside for another person (ie: a grandmother wants to set aside $15,000 for a disabled grandson) a third party or WisPACT Trust II is the ticket.
Since the funds deposited in a first party trust belonged to the disabled beneficiary at one point, those funds are subject to Wisconsin’s Estate Recovery Program. That means that any funds remaining in a first party WisPACT trust after a person dies are either (1) sent to the State of Wisconsin to repay an estate recovery claim or (2) distributed to other WisPACT beneficiaries.
Funds in a third party WisPACT trust are not subject to Estate Recovery Claims because the funds never actually belonged to the disabled beneficiary. So, instead of grandma and grandpa giving $1,000 at Christmas directly to a disabled grandchild and having the grandchild put the funds into WisPACT, it is a better idea to have grandma and grandpa create a WisPACT Trust II and designate their other grandchildren as the beneficiaries of the account if their disabled grandchild doesn’t use all of the funds during their life.