If your loved one is disabled or has special needs, a Special Needs Trust may be a valuable estate planning tool to consider. The purpose of a Special Needs Trust is to provide the resources to enhance the quality of their lives, after the death or incapacity of their caregiver.
A General Support Special Needs Trust is usually considered the primary source of benefits for a disabled individual. Regrettably, assets included in this type of trust can potentially be used to disqualify the beneficiary from receiving need-based government benefits, such as Medi-Cal. The most common type of Special Needs Trust is for Supplemental Care. These are meant only to provide secondary support after government benefits have been exhausted. This allows the individual to maintain eligibility for Supplementary Security Income (SSI) and Medi-Cal, while providing for all other needs that SSI and Medi-Cal do not provide.
Individuals with permanent special needs
If a disabled individual is still capable of earning a living, he or she may not actually be eligible for government assistance, such as SSI or Medi-Cal. A Special Needs Trust is also commonly used for individuals who have a permanent or severely disabling condition, such as blindness, chronic mental illness, paralysis and developmental disabilities, who are normally automatic beneficiaries of government benefits.
Individuals who do not require government assistance
Most of us will not know with any certainty whether our loved ones will need SSI or Medi-Cal. Therefore, it is a good idea to create a Special Needs Trust just in case. That way, you won’t have to be concerned about your loved one receiving an inheritance that will affect their eligibility for government benefits. Most Special Needs Trusts are drafted in a way that gives the trustee the power to terminate the trust, when it is no longer necessary.
Individuals who cannot manage their own finances
For those individuals who are unable to wisely manage an inheritance, a Special Needs Trust can be of great benefit. Trusts created for this purpose are often called “spendthrift” trusts, because they are used to keep assets out of the hands of a beneficiary (and of his or her creditors) and, instead, in the control of a trustee. For example, someone with mild developmental disabilities, mild autism, attention deficit disorder, or bipolar disorder might benefit from this type of trust, because it can prevent reckless spending.
Protecting a disabled loved one from being the victim of fraud is also a good reason to create a Special Needs Trust. The unfortunate reality is that there are many dishonest people who specifically target individuals with mental or physical disabilities, whom they believe have access to money. A Special Needs Trust can protect your loved one from becoming victims of fraud.
Special Needs Trusts are complicated legal instruments, and must be worded properly in order to be considered valid. Therefore, you should consult an experienced estate planning attorney to establish your Special Needs Trust. If you have questions regarding Special Needs Trusts, or any other estate planning needs, please contact the Schomer Law Group either online or by calling us at (310) 337-7696.