When to Consider a Special Needs Trust

On Behalf of | Aug 5, 2019 | estate planning

As you begin the estate planning process, you may be making many decisions about your future, such as making a living trust and designating a power of attorney to make certain decisions on your behalf in the event you become incapacitated and are unable to make them yourself. Some of the decisions you make regarding your estate plans may also be for the benefit of others, such as creating trusts and naming beneficiaries to receive distributions from your estate.

For all of your estate planning needs, the California attorneys at Galanti and Copenhaver are here to help. Our attorneys have many years of experience preparing special needs trusts, along with many different types of estate plans. We can help you begin the process of estate planning, and we can also step in if you find you need representation in estate-related litigation. Give our office a call today to schedule a meeting with one of our attorneys to discuss your estate planning needs.

Benefits of Preparing a Special Needs Trust

Special needs trusts have substantial benefits, though you are only able to create them under certain circumstances. The major benefit of a special needs trust is that it allows the disabled beneficiary to maintain eligibility for government benefits in connection with their disabled status, such as supplemental security income (SSI). Even if the disabled beneficiary is not yet collecting benefits, they will not be prohibited from collecting benefits in the future just because of the existence of the special needs trust.

Another benefit to creating a special needs trust is that since the funds in the trust are legally owned by the trust, not the beneficiary, it does not make the beneficiary ineligible for Medicaid. Medicaid is a federal and state program that provides medical assistance to those with financial need and are disabled. There are certain limits of income and assets that a Medicaid recipient cannot exceed, or they will lose eligibility for the program. When Medicaid eligibility is determined, the state only has the ability to take into consideration the applicant’s assets that are legally available to them, as well as their income.

When determining whether someone is eligible for Medicaid, the state may count only the income and assets that are legally available to the applicant. A special needs trust restricts the beneficiary’s own direct access to the assets in the trust to such an extent that the assets are not considered legally available to the beneficiary. A special needs trust can protect Medicaid eligibility because assets in the trust cannot be counted.

How to Decide if a Special Needs Trust Should Be Included in Your Estate Plans

There are some things you must consider before having a special needs trust prepared. First, you should know that there are two main types of special needs trusts. The first type of special needs trust is called a first-party special needs trust. This type of trust is funded with the trust beneficiary’s own assets. One example of when a first-party special needs trust is appropriate is in a case where the beneficiary has been awarded a personal injury settlement for an injury which caused them to become disabled. The disabled individual can choose to use their settlement or award funds that they received in their case to fund a special needs trust for their own benefit.

The other type of special needs trust is called a third-party special needs trust. When you create a third-party special needs trust, you are making a trust for which someone else is to be the beneficiary. Typically, the grantor (the one creating the trust) will have the special needs trust prepared during his or her lifetime. The grantor can also choose to have the special needs trust set to go into effect once they pass away. The trust will generally be set up so that the disabled beneficiary will be able to continue to receive government benefits (or be eligible to receive them at some point in the future).

What Can a Special Needs Trust Be Used For?

A special needs trust is generally used to enhance the quality of life for the beneficiary. The funds can be used to pay for caregiving, as well as things like internet service and a cell phone. Using money from the trust for clothing, furniture, and pet care are also typically allowed. Your attorney will be able to help you understand what can and can’t be paid for with funds from the special needs trust.

To get started with a special needs trust, contact the attorneys at Galanti and Copenhaver today.