If you currently provide care for a child or loved one with special needs (such as mental or physical disabilities), you must have contemplated with concern about what may happen to him or her if you are no longer able to provide or manage care.
Public benefits such as Supplemental Security Income (SSI) and Medi-Cal often provide for the bare necessities such as food, housing and clothing for the vulnerable members of our community. With budget deficits, these limited benefits often do not provide our loved ones with the resources that would allow them to enjoy a richer quality of life. But if parents or grandparents leave an inheritance to a loved one who is receiving public benefits, they risk disqualifying the individual from eligibility until the funds have been spent. Fortunately, the government has established rules allowing assets to be held in trust, called a “Special Needs” or “Supplemental Needs” Trust for a recipient of SSI and Medi-Cal, as long as certain requirements are met.
At Bay Laurel Law, P.C., we can assist you in structuring an inheritance left to provide for care and financial support of your special needs loved one in a way that protects the individual’s eligibility for critical public benefits. Often the needs of a person living with a disability go beyond food, shelter, and clothing and the medical and long term supports and services of Medi-Cal. A Special Needs Trust can finance those additional needs and can be set up immediately if funds are available for gifting, or only after your death.
A Special Needs Trust must be designed specifically to meet criteria for permissible distributions to prevent ineligibility for public benefits. Parents should be aware that funds from the trust should not be distributed directly to the beneficiary. Instead, it must be disbursed to third parties who provide goods and services for use and enjoyment by the beneficiary. Administration of a special needs trust is extremely complex, as trust law intersects with Federal and state program regulations, and often we advice clients to engage professional assistance in administering the trust.
The Special Needs Trust can be used for a variety of life-enhancing expenditures without compromising your loved ones’ eligibility such as:
- Annual check-ups at an independent medical facility
- Attendance of religious services
- Supplemental education and tutoring
- Out-of-pocket medical and dental expenses
- Transportation (including purchase of a vehicle)
- Maintenance of vehicles
- Purchase materials for a hobby or recreation activity
- Funds for trips or vacations
- Funds for entertainment such as movies, shows or ballgames.
- Purchase of goods and services that add pleasure and quality to life: computers, videos, furniture, or electronics.
- Athletic training or competitions
- Special dietary needs
- Personal care attendant or escort
Special Needs Trusts are a critical component of your estate planning if you have beneficiaries who are eligible for needs-based public benefits and for whom you wish to provide after your passing.