If you have a child with special needs, that receives public benefits such as SSI, Medicaid, or Medi-Cal, it is crucial that you plan for the transition of your estate with a Special Needs Trust. If you were to die and a special needs child were to inherit a part or all of your estate, that inheritance will disqualify the child from receiving public benefits. But if a Special Needs Trust is used, the funds inherited by the special needs child will NOT disqualify the child from public benefits, provided the trust is drafted correctly.
If your Special Needs Child is an Adult:
If your child is an adult, and has capacity to understand his or her actions, we strongly recommend that you have your child sign both Financial Power of Attorney and an Advance Health Care Directive. These documents give you the power to act on behalf of your child, without going through the formal court process of a conservatorship.
Purpose of a Special Needs Trust:
The purpose of a special needs trust is to maintain a beneficiary’s public benefits. The two basic benefits to be maintained are likely to be SSI (Supplemental Security Income) and Medi-Cal (known as Medicaid outside of California).
An SSI beneficiary receives a monthly cash payment for support because the beneficiary is aged, blind or disabled and his or her (or the family’s in the case of a disabled child) assets and income are low enough to meet a “means test.” SSI is intended to pay for the beneficiary’s food, clothing and shelter. An SSI recipient is automatically entitled to receive Medi-Cal benefits. If the beneficiary receives too much income or has assets that are too great, he or she is likely to lose his or her SSI eligibility – and the automatic Medi-Cal coverage along with it. The loss of Medi-Cal coverage can be a more serious problem than the loss of SSI benefits, especially if alternative medical insurance is not readily available.
How a Special Needs Trust Works:
The terms of this Special Needs Trust give the trustee a great deal of discretion over the funds, but they require the trustee to administer the trust for the beneficiary’s benefit to supplement any benefits the beneficiary receives from SSI and Medi-Cal programs or elsewhere. The funds are not considered available to the beneficiary and do not count as the beneficiary’s property in determining eligibility for SSI. The rules in this regard are complex and you should obtain competent legal advice when utilizing a Special Needs Trust.
In addition, you must be very careful in who you choose as Trustee. A person who holds property for another is a fiduciary. Every Trustee is a fiduciary and has certain duties which must be strictly carried out. These duties include:
- Duty to carry out the terms of the trust agreement.
- Duty of loyalty to the beneficiary.
- Duty to act and invest prudently.
- Duty to not delegate Trustee responsibilities.
- Duty to maintain the books and records and keep the beneficiaries reasonably informed of the trust administration.
The trustee must administer the trust solely in the best interests of the beneficiary and exclude from consideration his or her own advantage as well as exclude the welfare of any other person. Because the trustee is in control of the beneficiary’s property, he or she is held to a higher standard than that of an ordinary business transaction.
The Trustee must be careful to administer the trust in such a way as to supplement public benefits without violating eligibility rules, which can be very complicated.
Contact our office for a complimentary consultation on how a Special Needs Trust can benefit your family.