Special Needs Trusts
Be secure knowing all of your family's needs are taken care of.
Give your differently-abled loved one the care and enrichment you desire for them, when you're no longer able to provide that.
What is the purpose of a
Special Needs Trust?
A Special Needs Trust (also called a Supplemental Needs Trust) is designed to increase the quality of life of a disabled person by augmenting what is provided by various government programs.
Why is a Special Needs Trust necessary?
Most people with disabilities receive Social Security Disability (SSDI), Medi-Cal, and possibly also Supplemental Security Income (SSI) or Section 8 housing. These benefits provide food and basic shelter, but nothing extra to make life comfortable.
Even though they’re not large, those government benefits, especially Medi-Cal, are crucial for people with disabilities. But if family or friends give the disabled person money, that’s “income”, and the recipient can lose her benefits.
How does a Special Needs Trust help?
Congress realized that it would be unfair to take away benefits from a disabled person just because Grandma left him some money. So Congress allowed for Special Needs Trusts.
When money is put in an SNT for a disabled person, that money does not keep the disabled person from receiving desperately-needed benefits. The money can provide things most of us take for granted: internet access, phone service, bus fare or gasoline for a car. It can provide special equipment or assistance.
First Party Special Needs Trust
If the parents or grandparents leave an inheritance without having creating a special needs trust, or if the disabled person receives money in settlement of a lawsuit (often the one that caused the disability), the inheritance or the lawsuit settlement already belongs to the disabled person.
So a first-party special needs trust must be created. A parent or grandparent can be the legal creator of the trust. The beneficiary can be the creator of the trust if they're legally competent. After the beneficiary dies, Medi-Cal must be repaid before the rest of the money can be distributed to anyone else.
Third Party Special Needs Trust
The easiest kind of Special Needs Trust to create and to administer is a third-party Special Needs Trust. While they are alive, a grandparent, a parent, or anyone else can arrange for the creation of a special needs trust for their loved one and put money into it.
Two kinds of Special Needs Trusts:
Who will care for your differently-abled child when you can't?
Many parents help their children out in various ways after the “kids” are grown. They buy a tank of gas here, bring over a bag of groceries there, and maybe loan some money once in a while.
But you know your differently-abled child has deeper and more complex needs.
When they were small, you were the one there fighting fiercely for them to be allowed to do everything they were able to do. You were the one there trying to balance helping with encouraging independence, trying not to show you were crying inside if the other kids were mean.
You’d love to see them become completely independent,but in many cases that may never happen. They may never be able to work. If they’re adults, and have been able to work some, more than likely those jobs don’t pay enough to live on, or they don’t last. You may expect to provide some or all of their support the rest of your life.
No one can love your child the way you do. But at some point you will not be here to care for them. When that happens, you want to see them live as comfortably as possible
I'm not rich. How do I fund a Special Needs Trust?
You can make a Special Needs Trust a beneficiary of your estate. You can also purchase a life insurance policy and make the Special Needs Trust the beneficiary.
You probably have relatives, and even friends, who would like to help provide for your child. At Sonin Law, when we create a Special Needs Trust, we give you letters you can send to grandparents and other family members, asking them to direct any inheritance they want to give your child into the Special Needs Trust.
What can the Trust pay for?
In most cases, the trust should only pay for things not paid for by public benefits, such as transportation, clothes, internet, phone, dental care, durable items like furniture.
If the trust has a lot of money, the trustee can pay for food and housing, so that the beneficiary has a more pleasant life. If the beneficiary receives SSI, they will lose part of their check. But the trade-off is often worth it.
The government monitors what is paid for out of the trust. If a trustee makes payments incorrectly, the beneficiary can lose their vital pubic benefits. That's why it's often safest to appoint a professional trustee, such as a professional fiduciary, to be sure the rules are followed.
Provide for you child's future now.
Call us at (530) 662-2226 or submit the form below to begin your planning.
© 2015 Barbara Sonin
DISCLAIMER: In publishing these materials, the author is not engaged in rendering legal, accounting or other professional service. If legal advice is required, the service of a competent professional should be sought. No attorney-client relationship is created by the provision of this information.