Special Needs Planning: Protecting Your Loved One's Future and Government Benefits
By Kirsten Howe, Esq., California State Bar Certified Specialist in Estate Planning, Trust, and Probate Law
If you’re the parent, grandparent, or family member of someone with special needs, you face a unique and critical planning challenge that most families never consider: How do you provide financial support for your loved one without jeopardizing the government benefits they depend on?
What is special needs planning? Special needs planning is the process of creating legal and financial structures—primarily through special needs trusts—that allow you to set aside money and assets to enhance your loved one’s quality of life while preserving their eligibility for vital means-tested government benefits like Supplemental Security Income (SSI) and Medi-Cal.
Special needs individuals include those with physical disabilities, developmental delays such as autism, traumatic brain injuries, mental illness, or any condition that prevents them from fully supporting themselves financially. These individuals often rely on government assistance programs that come with strict income and asset limits—limits that can be triggered by even well-intentioned gifts or inheritances.
Why Special Needs Planning Matters More Than You Think
According to the Centers for Disease Control and Prevention, approximately 1 in 6 children aged 3-17 years have a developmental disability. For many of these families, the fear isn’t just about today—it’s about tomorrow. Who will care for your child when you’re gone? How will they maintain their quality of life without losing access to the healthcare and income support they need?
Without proper special needs planning, an inheritance that was meant to help your loved one could instead disqualify them from SSI benefits (which provide monthly income) and Medi-Cal coverage (which pays for essential medical care, therapy, and long-term support). The very gift you intended to provide comfort could instead create a financial crisis.
Having a special needs plan is critical—whether your child is 8 or 38, whether you’re a parent planning for after you’re gone or a grandparent wanting to leave a legacy.
The Special Needs Trust: Your Most Powerful Planning Tool
A special needs trust (also called a supplemental needs trust) is a legal vehicle that holds assets for the benefit of a person with disabilities without those assets counting toward government benefit eligibility limits. The trust is managed by a trustee who has the authority and responsibility to use trust funds to pay for goods and services that enhance your loved one’s life—things like:
- Medical and dental care not covered by Medi-Cal
- Rehabilitation services and therapies
- Education and job training programs
- Personal care attendants and companions
- Transportation and adaptive equipment
- Computers, phones, and technology
- Recreation, hobbies, and vacations
- Clothing, furniture, and home modifications
The trustee purchases these items directly on behalf of the beneficiary, ensuring the funds never technically belong to your loved one and therefore don’t jeopardize their government benefits.
The Three Types of Special Needs Trusts You Need to Know
First-Party (Self-Settled) Special Needs Trust: Created with the disabled person’s own assets (often from a personal injury settlement or unexpected inheritance). Must include Medi-Cal payback provisions.
Third-Party Special Needs Trust: Created by parents, grandparents, or other family members with their own assets. No Medi-Cal payback required, and you control who receives remaining assets after your loved one’s death.
Pooled Special Needs Trust: Managed by nonprofit organizations, these allow families with smaller estates to access professional trust management at lower costs.
Each type serves different purposes, and choosing the right structure requires careful analysis of your specific situation, your loved one’s needs, and your family’s goals.
Why You Need an Experienced Special Needs Planning Attorney
Special needs planning is one of the most complex areas of estate law. The intersection of federal benefit programs, state Medi-Cal regulations, trust law, and tax considerations creates a minefield of potential mistakes. Even well-drafted trusts can fail if they’re not properly administered or if families don’t understand the strict rules governing trust distributions.
At Absolute Trust Counsel, we’ve spent over 26 years helping California families navigate the complexities of special needs planning. We understand the emotional weight of these decisions and the critical importance of getting every detail right. Our comprehensive approach includes not just creating the trust documents, but helping you understand how to fund them, choose the right trustee, coordinate with government agencies, and plan for every stage of your loved one’s life.
To help you understand the importance of special needs planning and the options available to protect your loved one’s future, we’ve developed this comprehensive resource page filled with expert guidance, podcast episodes, educational videos, and actionable strategies. If you have questions or need help creating a special needs plan for your family, we’re here to help. You can reach us at 925.943.2740 today.
[Ad] Ready to protect your loved one’s future? Schedule a free consultation with our team. Call 925.943.2740 or visit our scheduling page to get started.
Understanding Special Needs Planning: Key Concepts
Special needs planning protects your loved one’s future while preserving access to critical government benefits. Here’s what every family needs to know about creating an effective special needs plan.
How Special Needs Trusts Actually Work
The core mechanism of a special needs trust is simple but powerful: the trust owns assets that benefit your loved one, but because your loved one doesn’t directly control those assets, they don’t count toward eligibility limits for needs-based government programs like Supplemental Security Income (SSI) and Medi-Cal.
Think of it this way: SSI has strict asset limits—currently $2,000 for individuals. If your child receives a $50,000 inheritance directly, they immediately lose SSI eligibility and their automatic Medi-Cal coverage. But if that $50,000 goes into a properly structured special needs trust instead, a trustee can use those funds to enhance your child’s quality of life (paying for therapy, technology, recreation, home modifications, and more) without triggering benefit loss.
The trustee purchases goods and services on behalf of your loved one rather than giving them money directly. This distinction—who controls the assets versus who benefits from them—is what makes the trust work within government benefit rules.
First-Party vs. Third-Party Trusts: Understanding the Critical Difference
Many families don’t realize there are fundamentally different types of special needs trusts, and choosing the wrong type can have serious financial consequences.
First-Party Special Needs Trusts are created with the disabled person’s own money—typically from a personal injury settlement, unexpected inheritance, or their own earnings. California law requires these trusts to include a “payback provision” meaning that when your loved one dies, any remaining funds must first reimburse Medi-Cal for all services provided over their lifetime. Only after that reimbursement can any remaining assets go to other family members. The beneficiary must also be under age 65 when the trust is established.
Third-Party Special Needs Trusts are created by parents, grandparents, or other family members using their own assets. These trusts do NOT require Medi-Cal payback, meaning when your loved one passes away, remaining assets can go to siblings or other family members you designate. There are no age restrictions for establishing these trusts.
This difference is crucial: if you’re planning to leave an inheritance to your special needs child, you want a third-party trust. But if your adult child with special needs receives an unexpected windfall, they’ll need a first-party trust established quickly to protect their benefits.
Common Misconceptions That Put Benefits at Risk
“My spouse can automatically manage our adult child’s finances if something happens to me.”
False. Once your child turns 18, even parents have no automatic legal authority to manage their finances or make their medical decisions without proper legal documents in place.
“My other children will just help their sibling—we don’t need a formal trust.”
This puts your non-disabled children in an impossible position. Any direct gifts or financial help they provide to their sibling could disqualify that sibling from SSI and Medi-Cal. A formal trust protects everyone in the family.
“We can just leave our special needs child’s inheritance to their sibling to manage informally.”
This creates significant legal and tax problems for the sibling, exposes the money to the sibling’s creditors and divorce proceedings, and provides no legal framework for managing government benefits. It’s also considered fraud if done to circumvent benefit rules.
“My child doesn’t have significant disabilities, so they don’t need a special needs trust.”
If your adult child receives SSI, Medi-Cal, or any means-tested government benefit, they need protection from unintended benefit loss through inheritance. Even high-functioning individuals who work part-time and receive partial SSI benefits need this planning.
Understanding Government Benefits: SSI and Medi-Cal
Supplemental Security Income (SSI) provides monthly cash benefits (currently up to $1,163.72 per month for individuals in California) to help cover basic needs like food and shelter. To qualify, individuals must have limited income and resources—generally no more than $2,000 in countable assets.
Medi-Cal provides comprehensive health coverage, including services that Medicare and private insurance don’t cover: long-term care, extensive therapy services, specialized medical equipment, home health care, and transportation to medical appointments. For many people with disabilities, Medi-Cal is literally a lifeline—without it, essential care becomes unaffordable.
Here’s what many families don’t realize: SSI recipients automatically qualify for Medi-Cal in California. This means protecting SSI eligibility often protects Medi-Cal eligibility as well. Lose one, and you typically lose both.
When Should You Start Special Needs Planning?
The short answer: now. Here’s why timing matters:
If your child is still a minor: Establish your estate plan with special needs provisions before any significant assets pass to your child. Your trust or will should include “just in case” provisions that automatically create a special needs trust if any beneficiary becomes disabled or is receiving government benefits at the time of your death.
If you have an adult child receiving benefits: Set up your estate plan immediately to ensure their inheritance flows into a special needs trust rather than directly to them. Tell your parents, siblings, and other relatives who might leave your child money to do the same or to leave nothing directly to your child (the inheritance goes to the trust instead).
If your loved one just received an unexpected inheritance or settlement: You have limited time to establish a first-party special needs trust before benefits are lost. This is an emergency—contact a special needs planning attorney immediately.
Why Special Needs Planning Requires Specialized Expertise
Special needs trusts exist at the intersection of federal Social Security law, state Medi-Cal regulations, trust law, tax law, and disability rights—making them one of the most complex areas of estate planning. A single mistake in trust language, funding, or administration can disqualify your loved one from benefits they depend on.
California has specific requirements that differ from other states. For example, California’s Medi-Cal rules for first-party special needs trusts have unique provisions about what types of assets can be held in trust and how distributions must be handled. Using a generic trust form or working with an attorney who lacks special needs experience creates serious risks.
The trustee’s role is equally complex. Trustees must understand which purchases are allowed (therapy equipment, computers, vacations, clothing) versus prohibited (buying a house for the beneficiary to live in, making direct cash payments, paying for food that supplants SSI benefits). One improper distribution can trigger benefit loss and create a financial crisis for the family.
At Absolute Trust Counsel, our 26+ years of California estate planning experience includes extensive work with special needs families. We understand the technical requirements, the government benefit rules, and—most importantly—the emotional weight these decisions carry for families who are creating plans to protect their most vulnerable loved ones.
[Ad] Protecting a special needs loved one requires precise planning and deep legal expertise. If you’re ready to create a comprehensive special needs plan or need to update existing documents, contact Absolute Trust Counsel at 925.943.2740 to schedule your consultation. We’ll help you navigate the complexities and create a plan that truly protects your family.
Download Our Free Reference Guide!
Special Needs – Letter of Intent
As a parent of a child with special needs, you may want to consider drafting a Letter of Intent as a companion piece to a special needs trust. This document can be critical in ensuring that your trustees and caregivers understand your child’s interests, routines, abilities, and hopes, and wishes for their future and well being. Download our free Letter of Intent tool to help you get started.
Absolute Trust Talk Podcast Episodes on Special Needs Planning
Understanding special needs planning is easier when you can hear real-world examples and expert insights explained in plain language. Our Absolute Trust Talk podcast features in-depth conversations with Kirsten Howe and guest experts who break down complex legal topics into actionable advice you can use.
Below, we’ve curated our most valuable episodes on special needs planning, covering everything from government benefits and housing solutions to education rights and financial planning strategies.
Episode 116: What are the Life Stages of a Special Needs Person?
Raising a child with special needs comes with unique challenges that evolve throughout their life. Kerrie Lloyd, Vice President at Index Fund Advisors, author of Planning the Future for A Special Needs Child, and mother to Adam (diagnosed with autism and deafness), breaks down the six distinct life stages of a special needs individual—from early diagnosis through adulthood—and the critical planning components for each phase.
What you’ll learn:
- The six life stages of individuals with special needs and the key milestones that mark each stage
- What resources are available during the elementary school years (physical therapy, occupational therapy, speech therapy, behavior management)
- Why Stage 3 (middle school) is a critical transition period that tests whether your plan is working
- What legal questions must be addressed when your child reaches age 18 (conservatorship, ABLE accounts, special needs trusts)
- How to plan for “forever”—creating a life care plan when school ends
- The importance of advocacy at every stage and why working with experts ensures you understand your rights
Visit the Show Notes Page for Episode 116: What are the Life Stages of a Special Needs Person?
Episode 114: This Long-Term Housing Solution is Changing the Way Adults with Special Needs Live
A 20-year study revealed that 99% of adults with autism are unable to live independently, and 70% end up living at home with relatives. When Mark Jackson’s son (now 32) was diagnosed with autism and about to age out of his private school, Mark faced a critical challenge: finding a fulfilling and supportive living environment. In 2013, he opened Sweetwater Spectrum, a three-acre farm site in downtown Sonoma supporting 16 full-time residents with developmental disabilities. In this episode, Mark and Executive Director Olivia Vain share their insights on creating sustainable special needs housing.
What you’ll learn:
- How Sweetwater Spectrum addresses individual needs of residents through customized support services (medication management, meal planning, food shopping)
- Why enrichment activities (physical activities, art, volunteering) are essential beyond basic care
- The difference between Sweetwater’s financial model (residents as lessees) vs. Living Unlimited’s “buy-in” model (residents as shareholders)
- Why California’s real estate costs ($500/sq ft vs. $200/sq ft in Ohio) make the buy-in model more viable for future projects
- How families participate in the program and whether they arrange support staff
- The critical lesson: Don’t forget the service side—if you can’t get staff, your facility will suffer
Episode 110: Free and Appropriate Public Education: How Do I Get One for My Special Needs Child?
Special needs children have a legal right to a free and appropriate public education—but “appropriate” is subjective, leading to conflicts between school districts and parents. California Special Education Rights Attorney Jennifer Chang litigates for children with special needs and educates parents on becoming better advocates. Whether you’re frustrated with your school district’s accommodations or want to be proactive, this episode provides essential guidance.
What you’ll learn:
- The two most common scenarios when families hire a special education attorney (eligibility disputes and service/placement disagreements)
- Why learning disabilities often don’t manifest until middle or high school when students have multiple teachers
- What an Individualized Education Plan (IEP) is and why it’s often a point of conflict
- The difference between IEPs (for learning disabilities) and 504 plans (for medical accommodations only)
- Why consulting with an attorney BEFORE there’s an issue is the best strategy
- The critical warning: Never sign any IEP agreement without consulting an attorney—waiver language means you have no case later
- Why staffing shortages are not a valid excuse—districts can hire outside services
Episode 099: A Creative Solution to the Special Needs Housing Challenge
When Susan Riggle’s daughter asked, “What’s going to happen to Tommy when you’re gone?”, Susan couldn’t provide an answer—and she discovered that the public sector didn’t have one either. Believing herself to be isolated, Susan attended a 2013 conference in Los Angeles and found more than 400 people searching for the same solution. That meeting gave rise to Living Unlimited, a nonprofit focused on solving one of the most pervasive challenges facing special needs families: long-term housing.
What you’ll learn:
- Why special needs housing is one of the biggest unaddressed challenges families face—and why the public sector still hasn’t responded
- How Living Unlimited creates viable, thriving special needs housing communities using a “buy-in” model where families are shareholders
- The revolutionary approaches that make Living Unlimited different from group homes and other alternatives
- What happens when families need to move or circumstances change—can they exit their investment?
- How Living Unlimited acts as a conduit for families to connect with each other
- The biggest challenge Living Unlimited currently faces and lessons learned from navigating CMS (Centers for Medicare & Medicaid Services) regulations
Episode 095: Special Needs Care Planning: It’s About More Than Just Legal Documents
Special needs care planning extends far beyond paperwork—it encompasses financial planning, living accommodations, day-to-day care, and quality of life considerations. Ann Koerner, CEO and Founder of National Care Advisors, shares her nursing background and extensive business knowledge to help families navigate the complexities of special needs care planning. If you’re overwhelmed by the process or unsure where to start, this episode clarifies the path forward.
What you’ll learn:
- The most common scenarios that prompt families to seek specialized outside help with special needs care planning
- Why parents often underestimate, financially, how much care will actually be needed when they’re no longer around
- The significant change that occurs when a special needs person turns 18 (conservatorship considerations)
- Why failing to seek qualified outside help to “save money” often has the opposite effect—professionals can unearth resources that lessen financial burden
- The role siblings usually prefer to play (often not the same role as parents assumed)
- How National Care Advisors helps during divorce situations, which create unique challenges for special needs families
- Solutions for housing young adults who can’t live independently but also can’t live with their parents
Episode 076: Don’t Let an Inheritance Destroy Government Benefits Eligibility
An unexpected inheritance can instantly disqualify a special needs person from SSI and Medi-Cal—the very benefits they depend on for survival. In this episode, Kirsten and fellow Absolute Trust Counsel attorney Madison Gunn discuss emergency solutions when an inheritance threatens to destroy government benefits, including first-party special needs trusts and court petitions for modification.
What you’ll learn:
- The most common inheritance issues in special needs cases and how they impact government benefits
- What happens when someone dies without an estate plan and leaves money to a person with disabilities
- How to fix an inheritance problem before benefits are lost
- The two requirements for establishing a first-party special needs trust (must be under 65, must include Medi-Cal payback provision)
- Why you can’t just “give the inheritance away” to protect benefits—and the penalties you’ll face
- What a petition for modification means and when to use it
- The critical “just in case provision” every estate plan should include—even if you don’t currently have a special needs family member
Episode 043: Empowering the Disabled with Independence
Individuals with special needs face unique challenges when it comes to living, working, and participating in their community—but independence is possible. Tom Heinz, Executive Director of East Bay Innovations (EBI), discusses the variety of programs designed to enable and empower persons with disabilities to live their most productive, independent, and satisfying lives, including daily money management, disability benefits planning, and affordable housing solutions.
What you’ll learn:
- How special needs persons can find affordable housing through HUD rental subsidies
- The process for getting Section 8 housing vouchers
- Why getting a job won’t necessarily terminate your SSI or Medi-Cal benefits—and how to plan around employment income
- The most common services that special needs trust beneficiaries use at EBI
- How EBI is expanding its Case Management Services to provide more comprehensive support
- Concerns about housing and care as increasing numbers of people with disabilities become seniors
- Why special needs individuals of all ages, with the right support, can work and live independently
Visit the Show Notes Page for Episode 043: Empowering the Disabled with Independence
Episode 041: Special Needs Trusts: Don’t Let an Inheritance Blow Up Your Government Benefits
Most parents of special needs children understand the importance of planning ahead, and a special needs trust should be at the top of the list. But what happens if a special needs person receives an inheritance from someone other than a parent who didn’t set up a special needs trust? There are two different kinds of special needs trusts, and understanding the difference is critical to protecting government benefits.
What you’ll learn:
- What government benefits are critical to a special needs person (SSI and Medi-Cal)
- The difference between first-party and third-party special needs trusts—and when to use each
- Common scenarios for special needs planning and trust setup
- Why a special needs person would establish a first-party trust (to preserve an inheritance or settlement)
- The most important regulation when setting up a first-party special needs trust (Medi-Cal payback provision)
- Where to get started with special needs planning
- Kirsten’s top tip: Add a special needs provision to your trust even if you don’t currently have a special needs family member—circumstances can change
Episode 016: Behind the Scenes of Financial Planning for a Family With Special Needs
Morgan Stanley Senior Portfolio Manager Robert McLalan brings over 35 years of securities industry experience and a deeply personal perspective—he served as conservator for his sister Toni, who was born with Down syndrome. Throughout this episode, Bob shares stories about the types of decisions he had to make regarding Toni’s care, and how he learned to take charge, interpret her needs, listen to specialists, and get outside opinions to make the best decisions.
What you’ll learn:
- Bob’s “Three B’s” for special needs caregiving: Be cautious, be adversarial when necessary, be present
- Why a sibling may not be the best person to take care of a special needs sibling—and how to incorporate them appropriately
- How vital an attorney is in making decisions for a special needs child and the family
- Who should be on the team involved in “protecting” the special needs person (attorney, financial planner, care coordinator, trustee)
- The types of tough decisions you’ll make when you’re in charge (medical, residential, social)
- How critical financial planning is for a family with special needs—and the unique challenges
- The steps to take to get a special needs family financially set up (inventory assets, establish trusts, fund accounts, create investment strategy)
Want More Episodes?
Explore our complete Absolute Trust Talk podcast library with over 190+ episodes covering estate planning, trust administration, elder care, Medi-Cal planning, and more. Visit our Podcast Page to browse all episodes.
Explore Our Special Needs Related Videos
One of the most distressing thoughts for parents of children with special needs is simple but profound: “What happens when I’m no longer here?” This video walks you through the essential foundation of special needs planning—creating a comprehensive plan that replaces you as the parent and ensures your loved one continues to receive quality care and financial support after you’re gone, without jeopardizing critical government benefits.
Independence doesn’t mean doing everything alone—it means having the right support systems in place to live your most fulfilling life. In this episode of Absolute Trust Talk, Kirsten Howe interviews Tom Heinz, Executive Director of East Bay Innovations (EBI), who discusses the comprehensive programs and services designed to help individuals with disabilities achieve greater independence through employment, affordable housing assistance, disability benefits planning, and community integration.
Government benefits like SSI and Medi-Cal are lifelines for individuals with special needs—but these benefits come with strict income and asset limits. One unexpected inheritance or gift can instantly disqualify someone from the benefits they depend on. In this episode of Absolute Trust Talk, Kirsten Howe explains the critical difference between first-party and third-party special needs trusts, and what happens when a special needs person inherits money.
Learn More with These Informative Articles
- New Law Addresses Needs of Disabled Plane Passengers
- Options For Distributing To Your Children
- Planning for the Needs of Disabled Children
- Special Needs Planning Must Be Multi-Generational
- Special Needs Planning Making the Trust Work Over Many Years – Part 1
- Special Needs Planning Making the Trust Work Over Many Years – Part 2
- Planning for the Needs of Disabled Children
- A Quick Explanation of Special Needs Trusts
Frequently Asked Questions About Special Needs Planning
What is special needs planning? Special needs planning involves creating legal and financial strategies to provide for individuals with disabilities while preserving their eligibility for government benefits like SSI, Medi-Cal, and other assistance programs.
What is a special needs trust? A special needs trust holds assets for the benefit of a disabled individual without disqualifying them from government benefits. The trust can pay for supplemental needs like education, recreation, and medical expenses not covered by public benefits.
What’s the difference between first-party and third-party special needs trusts? A first-party special needs trust is funded with the disabled person’s own assets (like an inheritance or lawsuit settlement). A third-party trust is funded by others (typically parents or family) and generally offers more flexibility and protection.
What is a pooled special needs trust? A pooled SNT is often a practical alternative for small estates. In this case, a nonprofit corporation or other service provider manages sub-accounts belonging to many beneficiaries as a single entity. Since many financial institutions do not handle small SNTs or charge high fees, this model allows small estates access to highly skilled trustees to manage the assets of the SNT. Funds that remain when the special needs person dies are typically divided between Medi-Cal and the nonprofit corporation that operates the pooled trust.
What is a trustee? A trustee is a person or institution selected to administer a trust and manage its assets. The trustee’s role is to adhere to the terms of the trust document and fulfill its objectives. You may wish to name yourself or another family member as trustee of the special needs trust, or you may wish to name a professional trustee. Another option is to name a family member and a professional trustee as co-trustees.
What responsibilities does a trustee have? Administering a special needs trust is considerably more complicated than managing most other trusts. The trustee is responsible for investing funds, making disbursements, paying taxes, and maintaining detailed accounts. This requires an understanding of government programs, including the strict regulations that govern the use of SNT assets. Improper use of funds can disqualify the special needs beneficiary from receiving important means-tested public benefits. In addition to handling all technical requirements, the trustee should also have a deep appreciation for the beneficiary’s needs and desires so that the trust is used to do the most to ensure his or her quality of life.
How is a special needs trust typically funded? In many cases, a special needs trust is established, but not funded, while the parent or other creator is alive. Upon the parent’s death, his or her will transfers the special needs child’s portion of an inheritance to the special needs trust. The trust (instead of the child) can also be designated as the beneficiary of various assets, such as employee benefits and life insurance policies. Typically, a special needs trust is funded using: life insurance, cash (including gifts from relatives), investments (e.g., stocks, bonds), retirement plan benefits (e.g., pension benefits, IRA funds, 401(k) assets), personal and real property, or proceeds from a personal injury settlement (applies to self-settled trusts).
Can a special needs trust own a home? Yes. A special needs trust can purchase and own a home for the beneficiary’s use. This can provide housing security without affecting benefit eligibility, though specific rules must be followed regarding ownership and expenses.
What is an ABLE Account? In late 2014, Congress passed the Achieving a Better Life Experience (ABLE) Act, which authorizes states to create tax-free savings accounts that can be used to pay for disability-related expenses without affecting an individual’s eligibility for means-tested government programs. To hold an ABLE account, an individual’s disability must have occurred prior to age 26. Most ABLE programs allow eligible individuals to participate regardless of their state of residence. Only one ABLE Act account can be established per individual, but there is no limitation on the number of individuals who can contribute to that one account.
How do special needs trusts impact Medi-Cal eligibility? Medi-Cal is a joint federal-state program that provides medical assistance to those who are disabled and can demonstrate financial need. To qualify, children and adults’ monthly income and the value of their other assets must fall below certain limits. In determining eligibility for Medi-Cal, the state may count only the income and assets that are legally available to the applicant. A special needs trust restricts the beneficiary’s own direct access to the assets in the trust to such an extent that the assets are not considered legally available to the beneficiary, and therefore, a special needs trust can protect Medi-Cal eligibility.
What about Supplemental Security Income (SSI)? Children and adults with special needs who have limited income and resources often receive monthly benefits from Supplemental Security Income (SSI). These cash benefits can be used for basic needs such as housing and food. But because SSI benefits are need-based, inheriting money can mean that a child with special needs will lose his or her eligibility for this benefit program. By naming a special needs trust as your beneficiary instead of your child, however, assets can be devoted to the care of your loved one without jeopardizing SSI eligibility. In addition, since SSI recipients are normally automatically eligible for Medi-Cal benefits, preserving your child’s eligibility for SSI may preserve his or her eligibility for Medi-Cal as well.
What happens to a special needs trust when the beneficiary dies? For first-party trusts, any remaining funds must first reimburse the state for Medi-Cal and other benefits provided. Third-party trusts can distribute remaining assets to other family members or charities as specified in the trust document.
What is a letter of intent? If you set up a special needs trust through your will, you might also want to draft a letter of intent to describe how you want your child to be cared for after you’re gone. Although it’s not a legal document, a letter of intent can provide important information to guardians, trustees, family members, and others involved in the care of your child. The letter may address such issues as your child’s medical needs, daily routine, interests, likes and dislikes, religious practices, living arrangements, social activities, behavior management, and degree of self-sufficiency. Such a letter can prove invaluable to your child’s caregivers and can also make the transition to a new living situation as smooth as possible for your child.
How do I ensure my special needs child is cared for after I die? Comprehensive planning includes creating a special needs trust, appointing appropriate trustees and guardians, coordinating with government benefits, financial planning, planning for ongoing care needs, and ensuring family members understand the plan. Regular updates are essential as laws and circumstances change.
Do I need to work with a qualified attorney and financial advisor? Special needs planning is complex and technical, and the laws that govern special needs trusts differ from state to state. To properly execute special needs planning for your child’s future, work with a qualified attorney and financial advisor who has experience with the planning needs of families of individuals with disabilities. These advisors should also have a thorough understanding of the income, gift, and estate tax consequences that must be considered when funding and administering a special needs trust. Every special needs trust must be customized to meet the unique requirements of the special needs person and the family creating the trust.