Trusts are important estate planning tools that allow you to put money aside for any beneficiary you choose, while specifying how the property can be used. One common example is setting aside money in a trust for your children which they can only receive once they reach a certain age. You can also include requirements or limitations on how that money can be used by your children. A “trustee” is chosen to hold the property and be responsible for fulfilling the terms of the trust.
What is a Special Needs Trust?
Different types of trusts are created to fulfill different purposes. A Special Needs Trust is one of them. This type of trust is created for the benefit of the disabled or someone with “special needs.” A Special Needs Trust is irrevocable. That means it cannot be canceled and the assets are not subject to creditors. A Special Needs Trust is important in planning for the future when the caregiver of someone who is disabled is no longer capable to continue providing care.
There are two basic types of Special Needs Trusts.
Special Needs Trusts are broken down into two types. The first is the General Support Special Needs Trust. As the title suggests, a General Support Special Need Trust is expected to serve as the primary source of benefits for the disabled individual. Unfortunately, this type of trust can potentially cause problems for the beneficiary trying to apply for a need-based government program, like Medi-Cal or Supplemental Security Income.
The second type, a Supplemental Care Special Needs Trust, is the most common type used to provide for the future needs of the disabled. This type of trust is used only as a secondary source of benefits once government benefits have been exhausted. As such, this type of trust does not usually interfere with eligibility for government, needs-based benefit.
Special Needs Trusts can be created in different ways.
There are also different specific types of Special Needs Trusts, named according to how they are created and/or funded. One type is known as a Family-Type Special Needs Trust, in which parents or family members of the disabled individual fund the trust through their will or through a life insurance policy with the disabled individual named as the beneficiary. Another way families can fund the trust is by using a “living trust” which is effective immediately. However, the money set aside in a Family-Type Special Needs Trust cannot be used to purchase food clothing or housing, otherwise government benefits may be compromised.
A Special Needs Trust can also be ordered by the court when a disabled individual receives an inheritance or a court settlement. This Court-Ordered Special Needs Trust is different in that the beneficiary actually owns the money. Finally, a Pooled Special Needs Trust is one that is administered by a nonprofit organization, which holds the assets of several beneficiaries. Those assets are pooled together and invested as a common fund. The accounts for each beneficiary remain distinct for distribution purposes.
Getting Legal Help with Special Needs Trusts in Los Angeles
Special Needs Trusts can be complicated legal documents that require specific language in order to convey the purpose of the trust. You should always consult an experienced estate planning attorney to assist in creating a Special Needs Trusts in Los Angeles.