Experienced Special Needs Planning Attorneys

Why Choose Us?

Whether you are responsible for a child, spouse, sibling, or any loved one with special needs or who has a significant mental or physical disability, planning for the future is essential. Key considerations include: what will happen if you die before them? Who will take over their care? Manage their finances? What will they inherit and how? Will an inheritance jeopardize their public benefits?

Highly skilled with over 20 years of experience, Serva Law Group’s special needs planning attorney is a member of the Academy of Special Needs Planners (ASNP) who provide the highest quality service and advice to persons with special needs and to their families.

How to Leave Money to Someone with Special Needs or Disabilities

If you are planning to leave money to support a disabled loved one after you are gone, it's crucial to do it properly to ensure they receive the right assistance at the right time and avoid potential traps. Many people with disabilities rely heavily on government benefits, which are often means-tested. A large sum of cash, an investment account, or even a moderately-sized inheritance given directly to a loved one can easily disrupt these benefits, potentially disqualifying them from Supplemental Security Income (SSI) or Medicaid coverage.

Special Needs Planning

Special needs planning is a specialized area of law that helps protect public benefits for people with special needs while improving their quality of life. It provides a framework for medical care and asset management, and protects assets from creditors and predators. A key part of this planning is a Special Needs Trust (SNT).

A Special Needs Trust works like other trusts, with a Settlor (usually the parent) who creates the Trust, a Beneficiary (the person with special needs), and a Trustee who manages the funds. However, a SNT is more complex. Think of a Special Needs Trust as a legal bucket where you place assets for a person with special needs or disabilities. The Trustee manages this bucket for the Beneficiary. While you are alive, you may be the Trustee. When you can no longer serve, a Successor Trustee can take over. An SNT can be revocable (changeable) or irrevocable (unchangeable) and can be set up to start upon your death.

In California, a SNT aims to keep assets out of the Beneficiary’s direct ownership while providing support. The Trust, not your child, owns the assets, helping them avoid means-testing for government benefits. The appointed Trustee controls the Trust’s property, not the Beneficiary.

A properly constructed SNT ensures that your loved one does not need to report the Trust’s assets to Medicaid, preserving their benefits. The Trust funds aren’t considered the Beneficiary’s assets or income, so they can be used for expenses beyond healthcare, food, clothing, and shelter. These might include a motorized wheelchair, a specially equipped van, household furnishings, education, travel, and entertainment.

Additionally, an SNT protects assets from being taken or misused by others. A well-constructed SNT is managed by a Trustee you designate, who has a legal and fiduciary duty to your loved one with special needs.

The 2 Types of SNTs: First-Party and Third-Party Special Needs Trusts

There are two kinds of Special Needs Trusts: First-Party and Third-Party.

First-Party Special Needs Trusts must be set up using the assets of the person with special needs if they are under age 65. A parent, legal conservator, or court can also establish a First-Party SNT with these assets if the Beneficiary is younger than 65. The Trust must be funded with money owned by the person with a disability. These trusts are subject to a payback provision, meaning that upon the Beneficiary’s death, any remaining assets in the trust must be used to repay the state of California for benefits provided to the special needs Beneficiary.

Third-Party Special Needs Trusts are funded with assets from someone other than the Beneficiary. These trusts are the most common and effective way for parents to provide for a child with a disability and are not subject to the payback provision. Typically, Third-Party SNTs are established through a Revocable Living Trust, as a Stand-Alone Trust, or through a Will.

Comparison: First-Party versus Third-Party Special Needs Trust

Here’s the main issue with a First-Party SNT: after the Beneficiary’s death, the state may seek reimbursement from any remaining trust funds for Medicaid/Medi-Cal expenses. Therefore, a Third-Party SNT is generally a much better option. The benefits of a Third-Party SNT include:

  • No requirement to repay the state of California, allowing the Beneficiary’s heirs to receive a larger inheritance.
  • Flexible trust provisions that can be tailored to your wishes and the Beneficiary’s needs within legal guidelines.
  • Trustees and successors can be prepared and trained in advance.
  • Ensures that trust assets remain within the family.
  • Can include special provisions, such as a Care Manager, specific types of distributions, and authorization to terminate the trust if the Beneficiary is no longer disabled or in need of government benefits.

Overall, a Special Needs Trust offers many advantages, notably providing the Beneficiary with indirect access to funds for their supplemental needs, significantly improving their quality of life. The Beneficiary can use Medi-Cal benefits alongside trust distributions to pay for medical services not covered by Medi-Cal or for specialists who do not accept Medi-Cal payments. Additionally, a Special Needs Trust preserves eligibility for government assistance and spares the Beneficiary from the costs and formalities of maintaining a court-supervised conservatorship.

Create a Special Needs Trust Now

It's important to act promptly. If you have a child, grandchild, or other loved one with a significant disability or special needs, you should establish an SNT as early as possible. This allows the funds to grow and ensures you are prepared for any future needs.

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