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.
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 this 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.
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 this 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, you can set up to terminate the trust and distribute the assets outright to your loved one.
You name Ben’s mother and father as the Trustees of Ben’s Special Needs Trust. At your death, Ben’s Special Needs Trust will receive $100.000. 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.
You can use a Special Needs Trust for different types of beneficiaries who receive government benefits. These beneficiaries include people with permanent or temporary special needs or disabilities. Also, beneficiaries who may receive government benefits in the future.
You must discuss these issues with an attorney. The attorney will help ensure that your estate plan takes into account all aspects of your life. These aspects include loved ones with supplemental needs.