Special Needs Trusts are a specific type of trust, designed to protect the disabled and their public benefits. Estate planning clients who care for loved ones with special needs or disabilities have unique legal challenges, especially if they have real property that they want to pass on as part of their legacy.
Special Needs Trust Preserve Public Benefits
While the intent of those leaving property to a disabled child or other family member is based out of love, it can cause a loss of benefits. Social Security Income and Medi-Cal can be dramatically reduced or eliminated due to the inheritance of real property. Thankfully, there is something called a Special Needs Trust (SNT) that can avoid this problem. When properly set-up as part of an overall estate plan, a special needs trust will preserve public benefits and enhance a loved one’s lifestyle.
The Social Security Administration does not count assets in a SNT because assets are not owned by the disabled child. Rather, the assets are owned by the trust. As a result, the SNT ensures that those assets will be used for the disabled child’s benefit.
Flexibility of A Trust
Like other trusts, you can fund the Special Needs Trust with real property, cash, or other assets of your choosing. In addition, others may also contribute to the fund without loss of benefits to the disabled person. If the disability is caused as a result of personal injury, settlement funds can be set aside. Again, this ensures that the disabled child to access public benefits.
We understand that parents want flexibility for their children. Even so, we do not recommend leaving assets to a “well” child with oral instructions to care for the disabled child. This practice is extremely risky and doesn’t account for unforeseen issues like an early death of the “well” child, creditor problems, or simply not fulling the wishes of a deceased parent. We have even been successful in setting up a SNT after a death of a parent because the evidence showed that the parent “would have” set a SNT had they been properly advised.