A special needs trust can be useful if you want to provide for someone that you love who has a disability. We will look at the facts in this blog post.
Supplemental Security Income
People with disabilities oftentimes rely on the Supplemental Security Income program. This program provides income for people with special needs who are not in a position to earn much on their own. To qualify, you must be able to prove that you have significant financial need, and you could lose eligibility if your financial status was to improve.
Medicaid is another government program that is important for many people with special needs. We practice law in the state of California. In our state, the program is called Medi-Cal. This is a health insurance program, and clearly, people with disabilities are going to required medical care and treatment. Depending on the situation, a lifetime of care can cost millions of dollars.
Once again, this is a need-based program. If someone who is enrolled in the Medi-Cal program was to come into money, benefit eligibility could be lost.
You have to take government benefit eligibility into account if you want to leave an inheritance to someone who is relying on Medi-Cal and Supplemental Security Income. This would also be an issue if you want to give a significant gift to a loved one with special needs.
Your intentions are good, but the benefit eligibility hinges upon financial need, so you have to tread lightly and make informed decisions.
Special Needs Trust
There is a solution that is widely utilized by people who want to make their loved ones more comfortable without jeopardizing benefit eligibility. This can be accomplished through the creation of a special needs trust. These trusts are alternately referred to as supplemental needs trusts.
The benefit programs do not cover everything that the recipient may require. The needs that are not being met by the benefits are referred to as supplemental needs. These would include recreational activities, computers, computer equipment and other electronics, education, dental care, and many other things.
When a special needs trust has been established, the trustee can use assets in the trust to satisfy these supplemental needs. Since the needs are not being met by the government benefits, the expenditures are allowed, and government benefit eligibility is not impacted.
The trustee must follow the rules closely, and the beneficiary cannot directly utilize assets that have been conveyed into the special needs trust. You could name someone that you know personally to act as the trustee, but another option is available to you. Many people will use a professional, corporate trustee. Banks offer trust administration services, and trust companies will also provide these services.
The federal government requires Medi-Cal to seek reimbursement from the estates of people who were enrolled in the Medi-Cal program. However, the Medi-Cal program cannot seek to attach assets that remain in a special needs trust that was funded by someone other than the beneficiary. This is referred to as a third-party special needs trust.
However, it is also possible for a parent or grandparent to establish a trust that is funded with the beneficiary’s own resources. This would be a first party or self-settled special needs trust. The same situation applies with regard to the trustee having the ability to use assets in the trust to satisfy the supplemental needs of the beneficiary.
When this type of trust is in place, the Medicaid program would seek reimbursement from the beneficiary’s estate after his or her passing.
Are You Interested In Creating a Special Needs Trust?
It takes careful planning to properly provide for a loved one with special needs who is relying on government benefit programs. If you take the right steps, you can improve the beneficiary’s quality of life significantly while benefit eligibility remains intact.
If you would like to learn more about special needs planning, our firm can help. We offer seminars on an ongoing basis throughout different locations in Los Angeles County. A great deal of very useful information is passed along during our sessions, and you can learn a lot about special needs planning and other important estate planning matters if you attend the seminar that fits into your schedule.
There is no charge to attend our seminars, but we do ask that you browse through our schedule and register for the session that you are interested in attending so that we can reserve your seat. To get all the details, visit this page: Los Angeles CA Estate Planning Seminars.