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 the person 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 who is receiving government assistance, 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 autistic 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 regular trust, you leave the inheritance to a “Special Needs Trust” or “Supplemental 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 autistic and receives government benefits that his parents do not want him to lose. Rather then leaving Ben the $100,000 outright, or in trust, you leave the money to Ben’s Special Needs Trust.

You will be able to choose someone to serve as trustee , 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 people who receive government benefits, including people with permanent or temporary special needs, people who may someday have special needs, and anyone who receives SSDI or Medi-Cal.

Special Needs Trust

Someone With Permanent Disability

A person who will need government assistance their entire lives because of a permanent or severe disability will benefit from the use of a Special Needs Trust. For example, people with blindness, developmental disabilities, Down syndrome, brain damage, chronic mental illness, physical paralysis, or congenital disabling afflictions such as cerebral palsy or cystic fibrosis are the most common recipients of government benefits. But of course, there are many other physical and mental disabilities to look out for when planning your estate.

Someone With Temporary Disability

Some people have disabilities that may not be permanent. Depending on their condition in the future and advances in technology, they may or may not need government benefits. Even though it is difficult to predict whether your loved one will need government assistance in the future, you can still create a Special Needs Trust for peace of mind. If your loved one does not need the trust in the future because they are not receiving government benefits, then great, the trust will terminate and the assets will be distributed to your loved one. The Special Needs Trust should take into account the possibility that the trust, for whatever reason, may not always be necessary. The Special Needs Trust should also give the trustee the power to terminate the trust if that is the best for the beneficiary.

Someone Who May Need Government Benefits In The Future

Some people who aren’t disabled now may need assistance from SSI or Medi-Cal at some point because of a condition that is likely to get worse. For example, Ben has aspergers but his parents are wealthy enough to take care of all of his needs. Ben might not need government assistance today, but after his parents are no longer living, he may need Medi-Cal or other government assistance. If you think it’s more likely than not that a loved one will need government assistance for a significant length of time, it makes sense to set up a special needs trust now. As mentioned before, the trustee can terminate the trust if it is not needed.

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.

Our Sherman Oaks and Glendale special needs attorneys will help you understand how a Special Needs Trust works and whether you need one. Contact us at 818-649-9110 or email us at info@bazikyanlaw.com for a free consultation.