A California special needs trust (or supplemental needs trust) holds assets for the benefit of someone to improve the quality of his life without jeopardizing government benefits that are available to him.
Here and in the next post we will discuss the basics regarding special needs trusts. This is the first post in a two-part series.
Who Needs a Special Needs Trust?
A special needs trust will benefit any person who is receiving assets and already receives government benefits based on financial need. It also benefits you if you anticipate receiving those assets and government benefits but are not yet receiving them. Whoever receives the assets and government benefits is the beneficiary of the special needs trust.
Many types of government benefits require the person receiving the government benefits to have financial need, among other things. To receive (or to continue receiving) those benefits, that person needs to have sufficiently low assets and/or income. Examples of such government benefits include Supplemental Security Income (SSI) and Medi-Cal (California’s version of Medicaid).
Having a special needs trust can help regarding government benefits that require a low amount of assets. A special needs trust does not help with all types of government benefits because not all types of government benefits require a low amount of assets.
(For the remainder of this post, we will assume that the government benefits at issue are based on having a sufficiently low amount of assets. Also when we discuss a person who receives government benefits, the discussion also applies to someone who is anticipating receiving government benefits even though he is not yet receiving them.)
How Does a Special Needs Trust Work?
A special needs trust contains language that causes government agencies not to consider the assets of the special needs trust when determining whether the special needs trust beneficiary has sufficiently low assets. In other words, the assets of the special needs trust benefit you; however, they are not your assets.
The amount of assets of the special needs trust is irrelevant. A special needs trust could contain $100,000, or it could contain $10,000,000. In either case, the special needs trust assets won’t impact your government benefits eligibility.
Mostly the types of assets held by a special needs trust don’t matter for qualifying to receive government benefits. There are exceptions to that.
The trustee in charge of carrying out the terms of the special needs trust may pay from the trust assets for things that the government benefits do not provide. In other words the special needs trust assets will supplement, and not supplant, the government benefits. For this reason some people refer to a special needs trust as a “supplemental needs trust.”
How Do I Create a Special Needs Trust?
Generally there are 2 ways to create and transfer assets into a special needs trust. Depending on how that happens, the special needs trust will be:
- A first-person special needs trust; or.
- A third-person special needs trust.
One way is the person who anticipates receiving government benefits transfers his assets into the special needs trust. This is called a “first-person” (or first-party) special needs trust.
he other way is that someone other than the person who anticipates receiving government benefits transfers her assets into the special needs trust for the benefit of that other person. This is called a “third-person” (or third-party) special needs trust.
In the next post we will discuss both first-person special needs trusts and third-person special needs trusts.
Get Help from an Experienced Special Needs Trust Attorney
Making a mistake creating and funding a special needs trust can be catastrophic. It could cause someone to lose government benefits that he relies on for important basic needs: medical care, housing, etc.
Hiring an attorney with experience with special needs trusts can help avoid this. In addition, the advice and guidance of an attorney experienced with special needs trusts is invaluable for attaining your goals in creating and carrying out the terms of special needs trusts.
At Meinzer Law Firm, P.C., we have over 20 years of experience helping clients achieve their goals regarding special needs trusts. Contact Meinzer Law Firm, P.C., in Torrance to assist you with a special needs trust.
