Special Needs Trusts

photo of a woman in a wheelchair using a laptop computer

The primary purpose of a Special Needs Trust is to preserve government benefits for disabled beneficiaries. Usually, the benefits are from government programs that have eligibility requirements with income or asset limits. If the beneficiary receives his or her inheritance outright, it disqualifies him or her from receiving future government benefits until those inherited assets are exhausted. Supplemental security income and Medi-Cal are two programs that are based on financial need. A beneficiary may also be entitled to housing subsidies, in-home support services, food stamps, and utility payment assistance, but these are only available based on financial needs of the beneficiary. Instead of leaving the assets directly to the disabled person, a person could establish a Special Needs Trust in his or her revocable trust. This trust is never under the control of the beneficiary. The trust has an independent trustee who provides for the needs of the beneficiary to the extent that government programs do not. This type of trust can pay for services that are required by the beneficiary such as education, telephone services, travel expenses, games, food supplements and grooming supplies.

Giving the disabled beneficiary’s inheritance to other family members does not guarantee that the beneficiary will receive the use of these funds. Money given to a relative can be subject to divorce claims or judgments of the relative who receives them. The funds can be lost through bankruptcy. The relative may decide not to assist the disabled person. Also, the relative may die before the disabled beneficiary does, and the money may then go to the relative’s heirs. A Special Needs Trust sees that a beneficiary actually receives the benefit of the inheritance.