Special Needs Planning

Q: What is a Special Needs Trust?

A: If your loved one receives SSI or Medi-Cal, then you know that he or she has limited assets and income.  If you have “too much” money, then you cannot be eligible for these programs.  Sometimes, despite the best planning, money lands in our laps (inheritance, personal injury award, etc.).  A Special Needs Trust allows your loved one to keep that money and maintain eligibility for public benefits like SSI and Medi-Cal.  The reason it works is because the money is held in a special Trust with very specific rules about how the money can be spent.


Q: Okay, well, we don’t have an inheritance or settlement or anything like that.  What if we want to set up a special needs trust to take care of a family member after we die…?

A: We can help you with that.  It’s a different kind of special needs trust called a “third party” special needs trust.  You can set it up now, while you are alive, to help pay for things for your loved one without jeopardizing public benefits, or, you can set it up so that the special needs trust is established at your death with assets from your estate.  You can also do a combination of the two: a special needs trust established and funded now, and then funded with additional money when you die.


Q: I don’t know what kind of benefits my loved one gets, how do I know if he/she needs a Special Needs Trust?

A: If your loved one is coming in to some money, and you know that he/she receives public benefits, you need to check! We can help you with this.


Q: So if my loved one is on SSI, and about to get an inheritance, a special needs trust lets him keep the money after all?

A: Yes, but the money is held in the special needs trust, which means that your loved one cannot reach the money directly.  Instead, the Trustee distributes money from the trust to pay for goods and services to improve your loved one’s quality of life.  So your loved one can’t have the money as cash, but can enjoy the money as the Trustee spends it on his/her behalf. Under limited circumstances it may be appropriate for your loved one to take the money, without a special needs trust, knowing that this will result in disqualification for public benefits.  If the amount of money is sufficiently large, then perhaps the cost of losing the benefits is outweighed by the benefit of having the available funds.  Again, this is only under very limited circumstances and you should thoroughly discuss these issues with a knowledgeable elder law attorney before making any decisions.


Q: I heard that the State takes the money when you die, is that true?

A: This is partially true.  When someone on SSI or Medi-Cal receives an inheritance, a personal injury award, a settlement award, or something similar to retain benefits, then that money has to go in a special needs trust with what is called a “payback” provision.  When the person with a special needs trust dies, the State will be paid back for the benefits paid on his/her behalf.  However, the amount to be paid back is limited by the amount left in the trust. In other words, if there’s only $10,000 left in the trust when a special needs beneficiary dies, but the State claim is for $50,000, the State is limited to the $10,000 that’s actually left over.  The State cannot come after others for the remainder of a claim.


Q: I just found out I’m the Trustee for my loved one’s special needs trust- can you help me understand what I have to do?

A: Yes, this is a very important role for you to fill.  You have certain duties and obligations, and there are procedures you must follow as you administer the trust.  We can explain this process, and provide guidance as you go along.  You may also want to contact a CPA to obtain additional tax advice too.