Properly planning for a person who has a disability can be a daunting task fraught with potential liability. The issues that arise concern the lifetime financial and personal care for the person. Typically, public benefits are being used to meet the person’s current care needs. To maintain such ongoing care, planning for persons with disabilities is centered around a properly designed and administered trust, called a special needs trust (SNT). The SNT provides funds to supplement public benefits without interfering with those benefits.
Some of the benefits of a SNT for the person with a disability include:
- Preserving public benefits to provide for lifetime financial support and medical care;
- Providing supplemental lifetime financial support by purchasing additional items and services that make life more rewarding;
- Providing a system of advocacy to preserve civil rights;
- Establishing an efficient, knowledgeable, and long-term management team;
- Providing a safe and clean living arrangement;
- Aiding in finding employment; and
- Providing avenues for enjoying the social and recreational activities that enhance the quality of life.
Not everyone with a disability requires an extensive plan, and only certain public benefits require an SNT to preserve benefits. Only those receiving needs-based public benefits, including Supplemental Security Income (SSI) and Medi-Cal, require an SNT. This is because an individual receiving needs-based benefits must only have a very limited income, and assets held in an SNT are not counted as the public benefit recipient’s assets for eligibility purposes and thus preserve eligibility.
Even when preservation of public benefits is not of primary importance, it may still be prudent to prepare and fund an SNT. Medicare does not pay for all types of medical care. Sometimes, Medi-Cal may be needed right away or is expected in the future, so planning with an SNT would still be needed. Further, an SNT is a fully discretionary spendthrift trust, meaning that assets are put in other people’s hands to be managed. This can be of great comfort to the family of a person with a disability who may be susceptible to influence by others or may not be able to manage his or her own inheritance.
This area is very important, but also very complicated. You’ll find everything you need to know about SNTs, including planning and funding them, in CEB’s Special Needs Trusts: Planning, Drafting, and Administration. Also check out California Will Drafting, chap 23 on third-party testamentary special needs trusts. If you already have some background in the area, you will want to check out Estate Planning 2010, with a chapter entitled: Special Needs Trusts: Beyond the Basics.
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