A Special Needs Trust is a trust designed to hold the inheritance or assets of a person with disabilities. Because of laws approving of Special Needs Trusts, the assets of the trust are not considered in determining the eligibility of the beneficiary for needs-based government assistance such as SSI and Medi-Cal. Without a special needs trust, a person with disabilities who receives an inheritance, gift, settlement from a lawsuit, or any other windfall is likely to lose his or her government assistance.
First Party Special Needs Trusts
First Party Special Needs Trusts are trusts funded with the assets of a person with disabilities who is currently receiving needs based government assistance or may get it in the future. These assets are likely the result of winning or settling a lawsuit, receiving and unprotected gift or inheritance, or some other windfall such as winning the lottery. Because the assets already belong to that person with disabilities, actions should be taken quickly to insulate these assets from the person with disabilities. First Party Special Needs Trusts are created by the parent, grandparent guardian, or the court. Under a new law that passed in 2016, a disabled person with capacity can now sometimes create his or her own First Party Special Needs Trust. First Party Special Needs Trusts are also sometimes called (d)(4)(A) Trusts or Court Created Disability Trusts.
Third Party Special Needs Trusts
Third Party Special Needs Trusts are funded by the assets of a person other than the person with disabilities, such as a parent, grandparent, sibling, or friend. A Third Party Special Needs Trust can be incorporated into a Will or revocable living trust. It can also be created as a standalone trust. A standalone trust is most often used where multiple persons will be contributing assets to the trust. An example might be a grandmother leaving an inheritance to her disabled grandson and that child’s parents also leaving an inheritance to him or her. By incorporating a special needs trust into their estate plan, these persons can leave an inheritance for their special needs loved one without fear of loss of needs-based government assistance such as SSI and Medi-Cal.
Administration of Special Needs Trusts
Special Needs Trusts require that the trustee administer the trust in such a way as to avoid disqualifying the beneficiary from government assistance. For this reason, considerable thought should be given to the selection of the trustee to administer the trust. Sometimes, a professional trustee is a superior choice to a family member. Additional input regarding the administration of the trust can be obtained through the use of a Trust Advisor or Trust Protector and a Trust Advisory Committee. The Trust Advisor or Trust Protector is usually a professional such as an attorney, CPA, or financial planner who knows of government benefits and the administration of Special Needs Trusts. The Trust Advisory Committee is usually composed of family members and friends of the special needs person familiar with the day to day activities and needs of him or her. Because of their close relationship to the person with disabilities, they are in a unique position to keep the trustee advised of his or her wants and needs.
Is a Special Needs Trust Right for Your Situation?
As members of the Special Needs Alliance and the Academy of Special Needs Planners, our law firm is in the unique position to advise you regarding the need for a Special Needs Trust As Well as the intricacies of administering a Special Needs Trust.
Visit One of Our Southern California Locations
With office locations throughout Southern California, Sandoval Legacy Group, a Division of Holstrom, Block & Parke, offers representation for Estate Planning, Special Needs Planning, Trust Administration, Probate, and Conservatorships in Riverside, San Bernardino, Orange, San Diego, and Los Angeles County.
Call our office at 951-888-1460 or contact us online to schedule an appointment with one of our attorneys.