The Basics Of Special Needs Trusts

When planning for those with special needs, relatives may face a dilemma. On the one hand, they want to leave as much property as possible to the disabled beneficiary or individual—they will obviously need as much help as possible, with the expenses that often come with special needs.

But on the other hand, leaving that person with too much property can end up having the opposite effect—you can leave so much to the beneficiary, that you end up disqualifying that person from need-based programs, such as Medi-Cal, housing subsidies, or social security benefits.

So how do you balance both? The answer is in what is known as a special needs trust.

Normal Trusts Won’t Do the Trick

You cannot just set up a standard trust, leave it to a special needs individual, and expect that to work. The government considers property in an ordinary trust to be the beneficiary’s property once you pass away, and the special needs person will find that their access to needed government programs will be taken away.

If you have enough  money to leave directly to a special needs loved one, this may not matter—you may have enough money to fully manage the beneficiary’s special needs throughout their lives, without needing government assistance. But given the high cost of medical care, in-home care, medicines, therapy, and all the things that special needs people often need, this is not common.

No Control Allowed

To be a valid special needs trust, the beneficiary can have no control over the funds left in the special needs trust. They cannot direct payments or distributions, or have control over when they get the property left in the trust for them. But since many special needs beneficiaries may be, by virtue of their special needs, unable to do this anyway, this may not be a big concern.

Because the beneficiary cannot direct payments, a trustee must be appointed, who understands the beneficiary’s needs, and who can distribute the trust assets in accordance with the trust directives—specifically, for the care and maintenance of the special needs beneficiary’s needs.

These directives must be specifically written. If they give the trustee too much autonomy to distribute however much the trustee wants, and too much is distributed to the beneficiary at any one time, the special needs beneficiary could again lose benefits.

When setting up a special needs trust, special care should be taken to make sure that the beneficiary qualifies for Social Security, or SSI benefits. That’s because other things, like California’s Medicaid program, are often based on whether or not the beneficiary also qualifies for federal SSI benefits.

First Person Needs Trusts

Sometimes, the special needs person themselves has assets that need to be included in a trust. Imagine someone who had an inheritance, settlement, or money from a divorce. That money needs to be carefully managed.

These are called first part special needs trusts, and they too can be used to maintain eligibility for government benefits.

Call the Torrance probate will and estate attorneys at Samuel Ford Law today if you need to plan for a special needs individual in your California estate plan.

Sources:

thearcca.org/info-resources/special-needs-trust-calable/

dhcs.ca.gov/services/Pages/Special-Needs-Trust.aspx