If you have a special needs child or are caring for a disabled adult, you may have major concerns over his or her welfare and future needs. One way to help ensure a better quality of life is to establish a special needs trust.
A special needs trust is a legal instrument designed to hold funds for a special needs individual to use for particular purposes without jeopardizing his or her eligibility for public benefits such as Medicaid or SSI. These purposes may include home care or to provide funds for technological devices like an ipad for education or for entertainment.
Types of Special Needs Trusts
There are two types of special needs trusts:
Assets belonging to the special needs individual
The assets in these trusts come from the funds of recipients of public benefits but you do have to reimburse the state for any Medicaid costs when the disabled individual passes away. To create this fund, you must adhere to certain provisions of the Omnibus Budget Reconciliation Act of 1993:
- The recipient must be under 65
- The trust can only be established by a parent, grandparent or guardian, or by the court. If pooled, the trust can be set up by the recipient.
- It must be irrevocable.
- The trustee must have sole discretion over use of the funds and not be required to make any payments from the trust directly to the recipient of the public benefits.
- Include a provision that any remaining funds go to the state for Medicaid costs since the time the trust was established.
Assets that are from someone other than the special needs individual
These are assets that come from the parents or anyone else involved in the individual’s welfare and which need not be used to reimburse the state at the death of the disabled individual.
This type of trust can be established after the disabled individual turns 65 and it is revocable by the settlor. When the individual passes away, the remaining funds may be distributed to the surviving heirs.
These funds can supplement any benefits received from Medicare or SSI and can ensure that the individual’s quality of life can be maintained after the parent or guardian passes away.
Pasadena attorney Christopher B. Johnson has been preparing Special Needs Trusts in Los Angeles, Riverside and San Bernardino counties since 1995 and welcomes your questions at (888) 503-7615 or by clicking here. We serve clients at our offices in Pasadena, and Chino Hills.