A special needs trust (also called a supplemental needs trust) is the primary legal tool for protecting a disabled child’s financial future without affecting their government benefit eligibility. Assets held inside the trust are not counted toward the SSI or Medi-Cal asset limits because the trust — not your child — is the legal owner.
The trust can pay for expenses that government programs do not cover, including:
- Education, tutoring, and vocational training
- Transportation and vehicle modifications
- Technology, communication devices, and adaptive equipment
- Recreation, travel, and social activities
- Personal care items and clothing
- Legal and financial advocacy
What a special needs trust cannot pay for directly are the basic food and shelter costs that SSI covers — doing so would reduce SSI payments. An experienced attorney structures the trust language precisely to avoid this.
Third-party vs. first-party trusts. A third-party special needs trust is funded by parents, grandparents, or other family members — typically through a will, life insurance policy, or direct contribution. A first-party (self-settled) special needs trust is funded with the child’s own assets, such as a personal injury settlement. The two types operate under different rules, and first-party trusts carry a Medi-Cal payback requirement at the beneficiary’s death. We can advise which structure fits your situation.
Choosing the Right Trustee
The trustee manages the special needs trust, makes distributions, and files annual accountings. This is not a role for just anyone. The trustee needs to understand the SSI and Medi-Cal rules well enough to avoid distributions that would jeopardize benefits — an innocent mistake can trigger a period of ineligibility.
Options include a trusted family member, a professional trustee, or a pooled trust administered by a nonprofit. Each has tradeoffs around cost, personal knowledge of your child, and continuity after your own death. We help families think through this decision carefully.
Coordinating Your Full Estate Plan
A special needs trust works best as part of a broader plan. Other family members — grandparents, aunts, uncles — may not realize that leaving money directly to your child in their own wills could cause the same benefit-disqualification problem. A letter of instruction to your extended family explaining that all future gifts should flow through the special needs trust, not directly to your child, can prevent costly mistakes.
Life insurance is commonly used to fund the trust at your death. We work with families to confirm the trust is named as beneficiary correctly and the coverage is sized appropriately. If your child may eventually need a conservatorship — court-supervised management of their personal and financial affairs — we can begin that planning as part of the same engagement.
Contact Our Special Needs Trust Attorneys
Planning for a child with disabilities requires an attorney who knows both the estate planning tools and the government benefit rules that govern their use. Alice A. Salvo is a California State Bar Certified Specialist in Estate Planning, Trust and Probate Law with over 20 years of experience serving San Fernando Valley families. Call our Woodland Hills office at 818-676-9572 or contact us online to schedule a consultation.
