If you would like to make provisions for the care of a disabled child or adult, you may want to consider setting up a special needs trust (also known as a supplemental needs trust or SNT). A special needs trust lets you leave property and other assets to your loved one without disqualifying them from certain government funded benefits, such as Medi-Cal or Social Security Income (SSI). At the same time, it allows you to provide for their special needs and ensure that they are able to live the quality of life and have the quality of care that you wish to provide for them even after you are gone.
Many public benefits are only available to “low-income” individuals who have little to no assets. Therefore, leaving a large sum of money to a loved one who depends on such benefits may automatically disqualify him or her from receiving these benefits. Establishing a SNT will allow you to provide for your loved one without jeopardizing their eligibility for government benefits.
As money cannot be distributed directly to the person with a disability, it is up to the trustee that you’ve appointed to administer and manage the funds to pay for your loved one’s special needs which can include:
- Out of pocket medical care
- Hobby or recreational activity items
- Vacations and other travel expenses
- Entertainment expenses
- Specialized care services
- Other goods and services that are not covered by government funding
- Personal care
Setting up a SNT for your loved one also allows him or her to receive assets from other people. For example, if a step-grandparent leaves your child $75,000, this money can be left to their SNT as well. Additionally, if you have an irrevocable life insurance trust (ILIT) where your child is a beneficiary, you can name their SNT as the beneficiary so that he or she can utilize the income from the ILIT while still receiving government-funded benefits.
It is important that the documents for your SNT provide specific instructions for how you would like your appointed trustee to handle the funds, ensuring that your disabled loved one is properly cared for and supported. Lonich Patton Ehrlich Policastri can help you draw up the paperwork necessary to establish the trust while making sure to include your specific instructions.