Typical estate planning tools may not necessarily be the solution if a loved one is disabled or has special needs. Californians have the option of utilizing a special needs trust (SNT), which provides a mechanism to address the anticipated future requirements of a special needs beneficiary.
When do you need an SNT and why? A special needs trust preserves a disabled person’s important government benefits, unlike a disposition of money or property through a standard estate planning tool like a trust or will. If this occurs, special needs beneficiaries will likely lose their eligibility for government benefits such as Supplemental Security Income (SSI) and Medi-Cal.
Because eligibility for these government programs is based upon income, assets, (and having a disability or blindness), the receipt of money or property in anything other than a special needs trust may reduce or even eliminate a recipient’s benefits. As resources increase, benefits decrease, and beyond a certain threshold, are eliminated entirely.
Individuals in California who have children with special needs based upon a disability should not wait until the last minute to seriously provide for these loved ones in a well-planned and carefully drafted estate plan. Third-party SNTs, discussed in the first part of this article, are funded with assets owned by an individual other than the trust beneficiary. The beneficiary never possesses nor has a right to possess these funds. Assets in third party trusts are not subject to recovery by the California Department of Health Care Services.
Individuals with concerns for a disabled or special needs family member should establish a special needs trust before they die. Federal and state law contain complicated rules and regulations for disabled individuals wishing to establish first-party or third-party SNTs. Parties interested in special needs trusts of any kind should contact an experienced and knowledgeable trust attorney. To learn more about special needs trusts, as well as wills, living trusts, powers of attorney, and newly available in California, “Transfer-On-Death” deeds, contact the legal team at The Swenson Law Firm.