Palm Springs Law Blog

Monday, October 7, 2019

What Is a Special Needs Trust?

Estate plans help us to take care of others and ourselves when we are not in a place to be able to do so ourselves. Whether due to incapacitation or death, we always want to be sure that our loved ones and ourselves will best be protected. This holds an even more important meaning for families who have a child or loved one with a disability. 

Once they reach the age of 18, the government treats all individuals with disabilities as adults. However, anyone who becomes disabled prior to the age of 22 may receive Social Security Income (SSI) benefits as long as the sum of their cash assets remains under $2,000 and their income stays lower than the amount of money they would receive in SSI benefits. 

How Special Needs Trusts Differ

There is a special type of trust called a Special Needs Trust or a Supplemental Needs Trust. This type of Trust can be held within a Revocable Living Trust or may be established as its own entity. Others can contribute through annual gifts or through their own Living Trust. Special Needs Trusts must comply with the applicable federal statute in Title 42 United States Code Section 1396(d)(4)(A).

It is important to know that there are differences between a Special Need Trust and a standard Trust. A Special Needs Trust allows the trustee to buy things that cannot be paid for by public assistance funds. This includes things such as wheelchairs, vans, toiletries, computers, and to pay for caregivers for the beneficiary without reducing his or her SSI benefits, which provide for food and shelter. If the money from the trust is used for food or shelter on a regular basis or is distributed directly to the beneficiary, these payments will be looked at as income to the beneficiary. 

However, if the trustee provides the beneficiary with food or shelter, their SSI benefit will be reduced, though not eliminated. If an individual is also the beneficiary of a retirement plan though, it could also serve to reduce or eliminate their SSI benefit. Receiving an inheritance also impacts the recipient, who will lose benefits until all of the money is spent. 

Heritage Legal, PC Helps Those in California Who Need a Special Needs Trust

A Special Needs Trust can be extremely helpful but they can often be complex and should be designed in a manner that best protects the beneficiary who has the disability. That is why it is in your best interest – and theirs – to consult with a knowledgeable and experienced California estate planning attorney

At Heritage Legal, PC, we understand how SSI benefits work and know how important it is to be sure that our family members are always looked after and protected. We also know how you can make distributions in a manner that will not impact those benefits. To learn more or to schedule a free consultation, contact us today!

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