Law Offices of Alice A. Salvo Logo

California Special Needs Trust Mistakes To Avoid

12/21/2022 | Special Needs Trust
California Special Needs Trust Mistakes To Avoid

For someone with a disability, a California special needs trust can be a critical resource.  Having this kind of trust in place means that the disabled individual can have the support he or she needs to have a higher quality of life.  One of the best features of a special needs trust is that it can pay for the beneficiary’s extra expenses without endangering their ability to qualify for income-sensitive programs such as California Medicaid (Medi-Cal) and Social Security Income (SSI).  Given its importance, it is vital that you know how to make sure you or your loved one’s trust is protected.  Here are some common California special needs trust mistakes to avoid:

Putting it Off

Caring for a disabled child or loved one can consume most of your time and energy, especially when you are juggling his or her needs with work and attending to other family members and your home.  These demands can leave little time to think about special needs trust planning.  Additionally, when the individual is young, it may feel as if you have more than enough time to set aside provisions.  However, it is not possible to predict the future and if something were to happen to you, without a trust in place, your child or loved one could be left an inheritance which disqualifies them from their benefits or without the means to pay for their extra expenses.  The sooner you start planning, the more time you will have to fund the trust.  While it may be hard to find the time, it is vital that you do so in order to ensure that your disabled loved one has a what they need to support their quality of life.

Failure to Fund and Customize

One common misconception is that you have to have excessive personal wealth to fund a special needs trust.  There are numerous ways to put funds and assets in this type of trust, including inheritance and family gifts.  Over time, small contributions which are invested wisely can add up and create a sustaining resource for your loved one.  Additionally, your loved one’s special needs trust should be tailored to his or her situation.  Otherwise, he or she may not be able to use the trust for his or her actual needs.

Choosing the Wrong Trustee

As with any trust, there will be a trustee who will be responsible for ensuring that the trust terms are complied with and who will make disbursements from the trust for approved purposes.  This may sound simple enough, but these tasks can be complicated, and if done incorrectly, can have devastating consequences for the person the trust is supposed to serve.   A special needs trustee must have a solid understanding of the benefit programs the beneficiary is using.  Otherwise, he or she could make a trust payment, which is perceived as income to the recipient.  If the beneficiary has too much income, they could be disqualified from receiving Medi-Cal and SSI.  Additionally, the trustee must protect the assets and make wise financial decisions.  Otherwise, the trust funds could be reduced to the point they will not meet the beneficiary’s needs.  To avoid these situations, it is imperative that you choose the right person or entity to serve in this role.

At the Law Offices of Alice A. Salvo, we have experience with California special needs trusts and can help you make to right choices as you plan for the future.  Schedule a free consultation today.