Special needs trusts can be used to provide for people with disabilities who are concerned about the preservation of government benefits. Many people who have special needs are unable to work, so they have very limited resources. As a result, they qualify for Medi-Cal as a source of health insurance, and they receive income through the Supplemental Security Income program.
There are essentially two different types of special needs trusts that are utilized. The major difference between them is the source of the funding.
First Party Special Needs Trusts
Sometimes a person with special needs will obtain resources after becoming eligible for Medi-Cal and SSI. There could be a personal injury settlement, an inheritance, or a life insurance payout.
Under these circumstances, a parent, a grandparent, or a legal guardian could use the funds to establish a first party or self-settled special needs trust. There are certain needs that the government benefits do not satisfy. These are called supplemental needs, and as a result, these trusts are alternately referred to as supplemental needs trusts.
The trustee can use assets in the trust to satisfy these unmet needs. Benefit eligibility would not be impacted as long as the rules were followed correctly. However, the Medi-Cal program would attach any remainder that may exist in the trust after the death of the beneficiary, because the program is required to seek reimbursement from the beneficiary’s estate after his or her passing.
Third Party Special Needs Trusts
If you wanted to use your personal resources to fund a trust to support a loved one with special needs who is enrolled in these benefit programs, you could create and fund a third party special needs trust. It would be a third party special needs trust because the funding would be coming from a third party; it would not be coming from the beneficiary.
Everything is the same with regard to the ability of the trustee to satisfy the supplemental needs of the beneficiary using funds in the trust. There is however one major, positive difference. After the death of the beneficiary, the Medi-Cal program could not go after funds that are remaining in the third party special needs trust.
Report on Special Needs Planning
As you might imagine, Medi-Cal rules and regulations that apply to the proper use of special needs trusts are rather complicated. We have provided a very basic overview in this blog post, but there is more to digest if you want to be thoroughly informed.
We have prepared an in-depth report that takes a closer look at special needs planning. The report is free, and you can access your copy through this website.
To obtain your copy of the report, visit this page: Los Angeles CA Special Needs Planning.
To Schedule a Free Consultation
If you are interested in the possibility of working with our firm after learning these facts, please select our “Workshops” tab to RSVP for a free estate planning workshop. At that workshop you will be offered a free one-hour consultation with an attorney: www.collinslawgroup.com/seminars/
- Why Would I Need a Secret Trust? - February 7, 2023
- Debunking Inheritance Planning Myths - January 26, 2023
- Tips for Alzheimer’s Caregivers - January 22, 2023
