Immediate Family Care Needs
Trusts are often used when people desire the benefits of ownership but not the burdens. With certain government-provided disability benefits, asset ownership reduces eligibility. Trusts are used because they are allowed to own assets that benefit an individual while not causing the person to be considered the ‘owner’ of the assets in the trust. Using a special needs (or supplemental needs) trust (SNT) allows a person with disabilities to qualify for government benefits and receive additional support from the trust.
The Santa Clarita special needs trust attorney at the Law Offices of Andrew Cohen works with disabled clients and their families to make sure benefit eligibility is maintained while additional support is available through a special needs trust.
What a Special Needs Trust Does
A special needs trust provides supplemental financial benefits to a person who is receiving some kind of government benefit for a disability where qualification for the benefit is based on financial need. Asset ownership must typically be extremely low to qualify for the benefit.
Supplemental Security Income (SSI) is one needs-based benefit available to people 65 and older and people of all ages who are disabled or blind. In California, the benefit includes both a federal portion and a state portion. Asset ownership is limited to $2,000 for an individual and $3,000 for a couple. But certain property, such as your home, car and other personal effects are not included when determining your total assets.
Any property over the amount allowed to qualify for benefits can be placed in a special needs trust where the beneficiary still gets the financial benefit of ownership in exchange for relinquishing control of the assets.
3 Types of Special Needs Trusts
There are three types of SNTs that are recognized for purposes of qualifying for needs-based benefits.
- First-Party Special Needs Trust: This trust is set up with money and assets owned by the person with the disability. The person must be under 65 and the trust must specify that any assets left in the trust at the death of the beneficiary go first to repay any government benefits received.
- Third-Party Special Needs Trust: This type of SNT is usually set up by family members for the disabled beneficiary with property other than the beneficiary’s. There is no requirement to pay back any benefits received and anything left in the trust when the beneficiary dies can be left to other designated beneficiaries.
- Pooled Special Needs Trust: A pooled special needs trust is either a first or third-party SNT that is part of a ‘pool’ of SNTs that is managed by a nonprofit organization. The nonprofit organization is willing to offer professional management and investment services in exchange for some portion of the remaining trust proceeds upon the beneficiary’s death. California has at least 10 pooled SNT options.
Rules for Using a Special Needs Trust
While special needs trusts can be a very good option to supplement a disabled beneficiary’s needs, the trusts have to be set up and administered in accordance with the law so they don’t jeopardize a beneficiary’s eligibility to receive other benefits. Certain language must be used in the trust and the trust proceeds must not be used for certain expenses.
- The trust purpose must be to supplement benefits the beneficiary receives from government sources.
- The trustee must have the discretion to decide when and how trust proceeds will be used for the beneficiary.
- The beneficiary cannot transfer any rights given by the trust and has no control over trust assets.
- Trust assets must not be used to pay for food or shelter.
- The trustee must pay the beneficiary’s provider directly.
Special needs trusts can be a great way to provide additional financial support for a disabled person while not preventing eligibility for other available benefits or disqualifying a beneficiary from their current benefits. However, the laws are very specific about what is required. It’s important to work with someone who has expertise in this area of law so you use the right type of trust and don’t jeopardize other benefits.
At the Law Offices of Andrew Cohen, we help you set up a special needs trust so that you or a family member can still qualify for government benefits. Our Santa Clarita special needs trust lawyer goes over the circumstances of your situation and assists you in selecting the right type of SNT to meet your family’s needs now and into the future. Click here to contact us for a free consultation to discuss which type of special needs trust will best accomplish your goals or call our office at 661-481-0100.