05 Mar What is a Special Needs Trust?

A Special Needs Trust is a special trust created for a loved one who is currently receiving or will receive Supplemental Security Income (SSI) and/or  Medi-Cal.

People who receive SSI and Medi-Cal are required to have only minimal financial resources to qualify.  If a loved one inherits an asset,  he or she can be at risk of losing his SSI or Medi-Cal benefits.  Although you may have the greatest intentions when planning to leave money or assets at your death to a loved one, you must plan very carefully. Otherwise, you may cause them to be disqualified from the benefits they are receiving.

For Example:  You want to leave $100,000 to your grandson, Ben. He is disabled and currently receives government benefits. At your death the inheritance may disqualify Ben from continuing to receive the government benefits.

You may be jeopardizing your loved ones future if you do not plan carefully. Rather than leaving the inheritance to your loved one directly or in a family trust, you can leave the inheritance to a “Special Needs Trust.” Your loved one will be the beneficiary of the Special Needs Trust. By giving the inheritance to a Special Needs Trust for the benefit of your loved one, you minimize or avoid putting their government benefits at risk.

For Example: As mentioned before, Ben is disabled and receives government benefits that his parents do not want him to lose. Rather then leaving Ben the $100,000 outright, or in your family trust, you leave the money to Ben’s Special Needs Trust. 

You will be able to choose someone to serve as trustee of the Special Needs Trust , who will have complete discretion over the trust property and will be in charge of spending money on your loved one’s behalf. The key to a Special Needs Trust is that your loved one (the beneficiary) has little to no control over the assets in the trust. Because they have no control they continue to be eligible for government benefits.  If the beneficiary no longer needs the government benefits, the trust can be set up to terminate and the assets can be distributed outright to your loved one.

For Example: You name Ben’s mother and father as the Trustees of Ben’s Special Needs Trust.  At your death, $100,000 will be given to Ben’s Special Needs Trust.  Ben’s parents will be in charge of using the money for Ben’s benefit. They will have discretion to use the money as they see fit. Ben will continue receiving his government benefits and have the $100,000 available for his supplemental use when needed.  If Ben no longer needs the government assistance, Ben’s parents can terminate the Special Needs Trust and distribute the money to him, outright.

A Special Needs Trust can be used for different types of beneficiaries who receive government benefits, including people with permanent or temporary special needs or disabilities, as well as beneficiaries who may receive government benefits in the future.

These issues and more are topics that need to be discussed with an attorney to ensure that your estate plan takes into account all aspects of your life, including loved ones with supplemental needs.