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Home » Special Needs Trusts in California » Understanding How a Special Needs Trust Can Provide for Your Child

Understanding How a Special Needs Trust Can Provide for Your Child

December 12, 2021Special Needs Trusts in California

Special needs planning

If you are the parent of a child with special needs, the ability to protect your child both during your lifetime and after you are gone is undoubtedly a constant concern. When you create your estate plan you likely want to provide financial assistance for your child to ensure that he/she is financially secure after you are gone. Care must be taken, however, to ensure that your child will benefit from the financial assistance you gift. To help you get started, a Los Angeles special needs planning attorney at Schomer Law Group, APC explain explains how a special needs trust can provide for your child.

Why Do I Need a Special Needs Trust to Gift Assets to My Child?

As the parent of a child with special needs, special care must be taken when estate planning because gifting assets directly to your child or loved one could do more harm than good. Adults with special needs often depend on state and federal assistance programs such as Medicaid, Medicare, or SSI. Those programs, however, typically have income and asset limits that cannot be exceeded by recipients. Gifting assets to someone with special needs, therefore, can result in disqualification for many of these much-needed programs. The solution is often found in the creation of a special needs trust.

Third Party Special Needs Trust

As the name implies, a third-party special needs trust is established by the third party with assets of the third party for the benefit of a person with special needs. This type of trust is most often established by a parent, or other family member, for the benefit of a child with special needs and uses assets of the parent, grandparent or family member. This type of trust must include specific language and must be worded such that the assets in the trust are distributed to a third party, such as the parent, to be used for the benefit of the individual with special needs. Because the assets held in the trust are not available to the beneficiary, those assets do not disqualify the beneficiary from eligibility for assistance programs such as Medicaid and SSI. In fact, the idea behind this type o special needs trust, which is also referred to as a “supplemental needs” trust, is that the assets held in the trust will be used to “supplement” the benefits provided by the state and federal government. 

First Party Special Needs Trust

The other common type of special needs trust is a first party, or self-settled, special needs trust. This type of special needs trust is established using assets of the person with special needs.  It must be established by the parent, grandparent, guardian of the person with special needs, or by a court. Only the person with special needs can be the beneficiary of the trust.  This type of special needs trust is most frequently needed when a disabled individual receives a lump sum of money, such as the result of a settlement for injuries in a personal injury accident. The lump sum would likely disqualify the beneficiary from eligibility for assistance from Medicaid, SSI, and other state and federal assistance programs. One of the other important differences between a third part and a first party special needs trust is that with a first party trust, any assets remaining in the trust upon the death of the beneficiary must be used to pay back Medicaid. With a third-party special needs trust there is no need to worry about repaying Medicaid.

Contact a Los Angeles Special Needs Planning Attorney

For more information, please join us for an upcoming FREE seminar. If you have additional questions or concerns about providing for your child with special needs in your estate plan, contact an experienced Los Angeles special needs planning attorney at Schomer Law Group APCby calling (310) 337-7696 to schedule an appointment.

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Scott Schomer, Estate Planning Attorney
Scott Schomer, Estate Planning Attorney
A graduate of Boston University School of Law, Scott P. Schomer is a frequent lecturer on estate planning and elder law issues, having discussed these important issues on local and national television. A seasoned courtroom advocate, Scott has obtained combined judgments and verdicts in excess of twenty-five million dollars for his clients. Scott has served as a member of the Los Angeles Superior Court Probate Volunteer Panel (PVP Attorney), Probate Settlement Panel and a Judge Pro Tempore. Scott's expertise has been recognized by his peers with such accolades as a life-time membership in the Multi-Million Dollar Advocates Forum, the Five Star Wealth Manager designation, and repeated nominations as California Super Lawyer.
Scott Schomer, Estate Planning Attorney
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