How can financial assets be left to a beneficiary with special needs without sacrificing the beneficiary’s receipt of government benefits?
How can an estate plan be arranged so that the beneficiary with special needs can live as complete and fulfilling a life as possible?
While you can certainly bequest money and assets to children or beneficiaries with special needs, such a bequest may prevent them from qualifying for, or cause them to lose their eligibility for, essential benefits under the Supplemental Security Income (SSI) and Medi-Cal programs. However, public monetary benefits provide only for the bare necessities such as food, housing and clothing, and these limited benefits cannot provide those loved ones with the resources that would allow them to enjoy a richer quality of life. Unfortunately, if parents leave any assets to their child who is receiving public benefits, they run the risk of disqualifying the child from continuing to receive public benefits. Fortunately, the government has established rules allowing assets to be held in a carefully defined trust called a “Special Needs” or “Supplemental Needs” Trust, for the benefit of a recipient of SSI and Medi-Cal, so long as certain requirements are met.
Q: When should a Special Needs Trust be established?
Generally, a Special Needs Trust (SNT) should be established no later than the beneficiary’s 65th birthday. If you have a disabled or chronically ill beneficiary, you may want to consider establishing the SNT at an early age. One benefit of having the SNT in place is that if the disabled beneficiary becomes the recipient of funds such as gifts, bequests or a settlement from a lawsuit they can immediately be transferred to the SNT without affecting that individual’s eligibility for government benefits.
Q: Who can establish a Special Needs Trust?
While parents typically establish SNT for their disabled children, any third party can establish a SNT for the benefit of a disabled beneficiary. It is important to seek the assistance of competent counsel when creating a SNT. A poorly drafted SNT can easily be subject to “invasion” by the government agencies that provide benefits.
Q: If our family is wealthy do we still need to create a Special Needs Trust?
You should still establish a SNT to protect your disabled beneficiary(ies) from potential creditors. For example, if your disabled beneficiary(ies) is/are ever sued in a personal injury action, the assets in the SNT would not be available to the plaintiffs. Furthermore, because the funds in the SNT are not countable as available assets for purposes of determining government benefit eligibility, more of your money can be used for those supplemental expenditures that will allow your disabled beneficiary to enjoy a higher quality of life. Otherwise, your assets will be used to pay for private care benefits that are extremely expensive and can drain even significant sums of money over a period of years.
SPECIAL NEEDS PLANNING
Q: What is special needs planning?
People planning for beneficiaries with a disability must address the following concerns:
Where will the beneficiary with special needs live?
Who will provide for a special needs beneficiary's personal needs?
Who will make medical decisions and arrange for proper care?