Special Needs Trust Essentials

When an individual has a significant disability, and financial resources are limited, qualifying for government programs is usually a crucial part of how he or she will be able to meet their basic needs. Because these programs are income-sensitive, qualifying recipients are not permitted to have more than a small amount in personal wealth and assets. Fortunately, you can supplement your benefits through a special needs trust without endangering your program eligibility. By knowing some special needs trust essentials, you can take advantage of this important resource.

California Special Needs Trusts

A California special needs trust is a kind of trust that allows trust payments to be made to supplement the benefits of programs such as Medi-Cal (California Medicaid) and SSI (Social Security Income).  The payments can only be made for specific types of expenses, or they could be counted as “income” for purposes of calculating program eligibility.

First-Party v. Third-Party Trusts

A special needs trust can be a “first-party” trust, meaning that it has been created by the beneficiary or with funds he or she is entitled to receive. However, when the beneficiary of a first-party trust dies, whatever is left in his or her trust can be claimed by the state to repay the Medi-Cal program.  If the trust is created by someone other than the beneficiary with funds that do not belong to him or her, it is considered a “third-party” special needs trust. With a third-party trust, the trust assets do not revert to the State when the beneficiary dies.

Permissible Expenses

Generally, special needs trust can be used to pay for things which make the beneficiary’s life more comfortable. These expenses may be for services or goods connected to the individual’s disability but may also be for leisure activities.  For instance, trust payments for clothing, massage therapy, health club dues, concert events, and travel are typically allowed.  The funds are not supposed to cover payment for essentials such as food and housing.

Trustee

A special needs trust will have a trustee who will be responsible for managing and overseeing the administration of the trust.  The trustee will have a fiduciary duty to safeguard trust assets and make prudent investment decisions.  This individual should be well-versed in SSI and Medi-Cal requirements and know which allocations are permissible. If a beneficiary does not feel that the trustee is performing adequately, there are ways he or she can ask to have the person removed from the role.

Determining how California special needs trusts work can be challenging.  At the Law Offices of Alice  A. Salvo, we have the experience you need to plan for your present and future care.  Please contact us online or by phone to set up a free consultation today so you can start your solution.