Caring for Disabled Children & Adults
Special Needs Trust
A special needs trust answers questions like these:Who will care for my disabled child when I am no longer able to do so?
Can my child maintain eligibility for SSI, Medi-Cal, government services, housing subsidies and other need-based public benefits?
A special needs trust provides a safer vehicle for providing funds to care for a disabled heir. The trust will protect assets from the claims of creditors and should, if properly drafted, allow the child to continue to qualify for the government assistance so vital to the child’s continued well-being.
Special needs trusts (also known as “supplemental needs” trusts) allow a disabled beneficiary to receive gifts, lawsuit settlements or other funds and yet not lose eligibility for certain government programs. Such trusts are drafted so that the funds will not be considered to belong to the beneficiary in determining her eligibility for public benefits. As their name implies, special needs trusts are designed not to provide basic support, but instead to pay for comforts and luxuries that could not be paid for by public assistance funds. These trusts typically pay for things like education, recreation, counseling, and medical attention beyond the simple necessities of life. (However, the trustee can use trust funds for food, clothing and shelter if the trustee decides doing so is in the beneficiary’s best interest despite a possible loss of or reduction in public assistance.)
Very often, special needs trusts are created by a parent or other family member for a disabled child (even though the child may be an adult by the time the trust is created or funded). Such trusts also may be set up in a will as a way for a family member to leave assets to a disabled relative. In addition, the disabled person can often create the trust him/ herself. These “self-settled” trusts are frequently established by individuals who become disabled as the result of an accident or medical malpractice and later receive the proceeds of a personal injury award or settlement. Each public benefits program has restrictions that the special needs trust must comply with in order not to jeopardize the beneficiary’s continued eligibility for public benefits.
In order for a plan involving a special needs trust to work, the parents’ estate plan must be modified. Any inheritance for the disabled child should be left to the special needs trust. Parents also must tell family members who might wish to gift or leave assets to the disabled child that they must direct all gifts and bequests for the child to the trust. Beneficiary designations on all life insurance policies, IRAs, retirement accounts, etc., must be changed so that the disabled child either does not inherit or the proceeds are directed to the special needs trust.
If you are ready to get started in creating a protection plan for your child or heir, contact Bridghet Mackay today at 707-769-9975
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