Planning your estate can be challenging, and having a dependent with special needs can complicate the matter. A Special Needs Trust (SNT) is a powerful tool designed to protect the financial security of your child (or other dependent) if you can no longer care for him or her.
What Is a Special Needs Trust (SNT)?
The World Institute on Disability offers this concise definition: “A special needs trust- sometimes called a “supplemental needs trust”- provides for the needs of a disabled person without disqualifying him or her from benefits received from government programs such as Social Security and Medicaid. A special needs trust makes it possible to appoint a trustee to maintain assets and retain or qualify for public assistance benefits.”
This trustee becomes responsible for managing the public assistance your dependent receives and handles the trust’s assets for the dependent, who is the trust’s beneficiary.
How Is an SNT Different Than a Regular Trust?
SNTs can supplement the public assistance income the beneficiary with special needs receives. In an ordinary trust, beneficiaries can renounce their rights to distributions from the estate. This is not the case with SNTs, as the beneficiaries are often ineligible to legally make those decisions. Beneficiaries of SNTs cannot legally sell or give away their rights to the trust.
How Will an SNT Affect Public Assistance?
Supplemental Security Income (SSI) is public assistance offered to those with disabilities. Typically, any other income a disabled individual obtains influences the amount of SSI received. This includes disbursements from inheritances, so an SNT is a measure that protects the disabled individual from lowering or losing his or her SSI by balancing it with disbursements from the trust.
SSI can pay for housing and food, for instance, and individuals typically use the SNT funds for other expenses, such as travel, purchasing computers and furniture, and discretionary spending.
Are There Different Types of SNTs?
There are three major types of Special Needs Trusts:
- First party. This is only available to people over 65 with a disability defined by Social Security. It primarily ensures any inheritances received will not disqualify the beneficiary from receiving public assistance.
- Third party. These SNTs, usually established by parents of dependents with special needs, may include life insurance that will pay out to the trust. Donors usually establish these trusts.
- Pooled SNT. Nonprofit organizations can help establish this trust, which collects assets from various sources to distribute to individuals with disabilities.
How Do I Establish a Special Needs Trust in CA?
Contact an attorney well-versed in special needs law. Planning your estate can be challenging, and worrying for your dependent with special needs and navigating around public assistance laws are not simple projects. Contact our team. We can review your situation, so you can maximize the assistance your loved one receives.