If you have been providing care for a child or other loved one with special needs, you’ve no doubt thought about what will happen when you’re no longer able to give that care. Of course, you can leave property to your loved one, but–as you are probably aware–doing so without some careful planning will almost certainly jeopardize his or her ability to receive benefits under the Supplemental Security Income (SSI) and Medi-Cal programs. Unless you make the right legal arrangements, benefits simply won’t be available until the inheritance is used up.
A common misconception is that planning for children with special needs requires families to disinherit them so they will qualify for public assistance. A much more attractive alternative is to set up a special needs trust to provide for each such child.
How a Special Needs Trust Can Help Your Family
To avoid unintentionally sabotaging a loved one’s eligibility for benefits, you can leave an inheritance in what’s called a “special needs” trust. Because the inheritance is held in the special needs trust, your loved one can keep receiving benefits.
Money you leave to a special needs trust is managed by the person or professional trustee you name as “trustee.” Your loved one (the trust’s “beneficiary”) can request–but not demand–that the trustee use trust funds for special needs. Because your loved one has no legal control over trust funds, the funds will not be considered a “resource” for purposes of SSI and Medi-Cal eligibility. A special needs trust could hold millions of dollars and still not affect your loved one’s right to SSI and Medi-Cal benefits.
The trustee is required to manage the trust property for the sole benefit of your loved one. The trustee can spend trust property on behalf of your loved one, as long as the payments don’t jeopardize eligibility for government benefits. Basically, that means trust funds can be spent for anything except food, clothing, and shelter. (And in certain situations, it’s okay for the trustee to spend trust money for those purposes as well.)
As a former social worker who worked with special needs children (see bio), Estate Planning Attorney Richard M. Seff is especially sensitive to the needs of the parents and family.