How a Special Needs Trust Could Protect Your Loved One
If you have a family member or loved one with special needs, you likely wonder how you can provide for them after you’re gone. Many people want to leave money or property to ensure that their loved one can live a full and happy life, but they know that doing so can result in their loved one losing their benefits. With the help of an estate planning lawyer in California, you may be able to support your loved one while still allowing them to keep their state and federal benefits.
Working with the team at Moga Law Firm can help you better understand your estate planning options and goals. Attorney Scot Thomas Moga is well-versed in all matters of estate planning and probate, making him a strong advocate for clients and their beneficiaries. Learn more about your options now by calling our estate planning law firm at 909-931-2444.
What is a Special Needs Trust?
A special needs trust is an estate planning tool that holds assets and funds on behalf of a person with disabilities. Because the trust owns the assets, not the individual, it does not affect their benefits. The assets are managed by a trustee who only spends funds on approved supplemental needs.
The individual’s basic needs are likely largely met by their benefits—a special needs trust goes one step further and covers expenses that can significantly improve their quality of life. Trust funds may be used on personal care attendants, medical or dental care not covered by their state insurance, home modifications, adaptive equipment, education, recreation, and travel.
Special needs trusts are governed by the Probate Code. These laws ensure that funds are handled appropriately and used only for the benefit of the beneficiary. When you work with an estate planning attorney to set up a trust, they can explain in detail how funds can and cannot be used.
Using a Special Needs Trust to Protect Eligibility for Benefits
To receive SSI or Medi-Cal, an individual with special needs can typically have no more than $2,000 in countable assets and limited income. If someone leaves an inheritance for that individual, those funds count against their assets, typically resulting in the complete loss of their benefits. The inheritance received by the individual is typically then wiped out in a matter of months as it’s used to cover medical expenses that would otherwise have been covered by their state benefits.
A special needs trust avoids that problem. Assets are not given to the individual. They are transferred to a trust, and only the trustee can decide how to spend them. These trusts are strictly regulated to ensure that assets are not misused, so trustees are required to follow spending rules.
The structure of a special needs trust allows people to improve their loved one’s quality of life without putting their benefits in jeopardy.
Types of Special Needs Trusts in California
The first type of special needs trust is a first-party trust. This is typically used when the individual receives an inheritance, personal injury settlement, or back payment of benefits that would put them over the limit. The trust is funded with the individual’s own assets and then used for their needs.
The more common option is a third-party special needs trust. Parents or grandparents fund the trust with their assets, and those funds are then used by the trustee for the beneficiary.
Nonprofit organizations may set up pooled trusts that combine funds for multiple beneficiaries for investment purposes. This option is less common but can be suitable when a professional trustee is preferred.
Choosing a Trustee
The trustee you select plays an important role in the special needs trust. Your estate planning attorney has likely seen the fallout of an irresponsible or untrustworthy trustee. The trustee you choose may be a family member, close friend, professional fiduciary, or organization. When making your choice, consider the individual’s knowledge of SSI and Medi-Cal rules, overall financial responsibility, willingness to make compliant and thoughtful spending decisions, and commitment to the beneficiary’s needs and best interests.
Get the Support You Need With Moga Law Firm
With an estate planning lawyer at Moga Law Firm, you can create a trust that allows your assets to provide for your loved one for decades after you pass. Set up a consultation with an estate planning law firm now by calling us at 909-931-2444 or sending us a message online.
Scot Thomas Moga, a dedicated attorney in San Bernardino & Riverside Counties who represents clients in the many types of personal injury, workers’ compensation and estate planning cases.
