Understanding California Special Needs Trust

If you have a child or other loved one with a significant disability, you have probably thought about ways to make sure that they will have all that they need in the future. For many, families, government programs such as Medi-Cal and Social Security will be critical resources. However, your child’s eligibility is income-sensitive meaning that he or she cannot have too many resources and still receive these much-needed benefits. If your child were to inherit assets or funds, this could result in the loss of essential medical care coverage, housing, income, and other vital assistance.

The Shortfall of Government Benefits

To remain eligible for Supplemental Security Income (SSI) and Medi-Cal an individual cannot have more than $2000 in assets. However, these government programs do not usually pay near enough to meet the recipient’s basic living expenses. If a parent wants to give their child additional resources or leave them an inheritance to make up the difference, both of these actions could result in the child being disqualified from SSI and Medi-Cal. Further, whatever assets he or she receives are likely to be quickly consumed by the expense of their care needs. Additionally, once your child is disqualified, the process of re-qualifying can take time leaving them without the resources they need such as medical coverage.

The Special Needs Trust Solution

Fortunately, there is a solution-Create a Special Needs Trust. This is a unique kind of trust which allows a qualifying beneficiary to have funds or assets placed in a trust for his or her benefit, without affecting government benefits. There are two types of Special Needs Trusts which are commonly used: “First-Party” and “Third-Party” trust.

A First-Party Special Needs Trust is created with assets which belong to the beneficiary or to which they are entitled to receive such as an inheritance, insurance policy payment or personal injury settlement amount.

A Third-Party Trust is a Special Needs Trust which is funded with assets which do not belong to the beneficiary and to which they have no right to own such as funds or assets provided by a parent, grandparent, or other loved one.

The most important difference between these two kinds trusts is that, under federal law, if the first-party trust ends or the beneficiary dies, the State must be provided with notice and recover up to half of the amount equal to the total medical assistance paid by Medi-Cal on the trust beneficiary’s behalf. By contrast, the assets from a third-party trust will not be subject to this recovery.

Establishing a Special Needs Trust

You can set up a Special Needs Trust during your lifetime or through your will. The trust documents need to include specific legal language to comply with California and federal law. Once the trust is signed by the grantor (trust creator), it becomes effective. However, it is critical that you meet with an experienced California Special Needs Trust attorney to plan for and create your device. By having the advice of qualified counsel, you can help ensure that your trust documents comply with the law and accomplish their intended goals.

Special Needs Trust can be a vital asset for your child or loved one with special needs. At the Law Offices of Alice A. Salvo, we have the Special Needs Trust experience you need to plan for your loved one’s financial needs today and in the future. Please contact us online or by phone to schedule an appointment and begin helping your family.