People with disabilities often rely on Medi-Cal for health insurance, and Supplemental Security Income can provide a minimal source of monthly income. A special needs trust is a type of legal device that can be used to provide support for a person with a disability who is enrolled in these government benefit programs.
Special needs trusts are used because Medi-Cal and Supplemental Security Income are only available to people who can prove that they have significant financial need. Individuals who have resources to speak of cannot qualify.
When assets have been conveyed into a special needs trust, the trustee can use the resources to satisfy certain approved needs without jeopardizing the beneficiary’s government benefit eligibility.
First Party Special Needs Trusts
Sometimes a person with a disability will have resources. The assets could have come from a personal injury settlement, life insurance proceeds, an inheritance, or from some other source.
A grandparent or parent could create a first party special needs trust for the benefit of the individual in question. These trusts are alternately referred to as self-settled special needs trusts.
The trust is called a first party special needs trust because it is being funded with the beneficiary’s own assets.
As long as the trustee acts within government benefit eligibility guidelines, resources that have been conveyed into the trust could be utilized to improve the beneficiary’s quality of life. Ongoing eligibility for Medi-Cal and Supplemental Security Income would not be jeopardized.
One thing to understand about a first party special needs trust is the reimbursement factor. When a first party special needs trust has been established, the Medi-Cal program will seek reimbursement from the estate of the beneficiary after his or her passing.
It is also possible to create a third party special needs trust with assets that are not the property of the beneficiary. If this type of trust has been established, there would be no reimbursement efforts.
Because of the above, you would not want to give a gift to a benefit recipient with the understanding that a first party special needs trust can be created with the assets that comprise the gift. The creation of a third party special needs trust would be more advantageous in the long run.
Free Report on Special Needs Planning
We have prepared an in-depth report on the subject of special needs planning. This report will provide you with a great deal of very useful information, and you can access your copy for free through this website.
To get your copy of the report, visit this page and follow the simple instructions: Campbell CA Special Needs Planning.
Schedule a Consultation
If you have questions about special needs trusts, we can provide you with answers. Our firm offers free consultations, and we would be glad to help you put a plan in place.
We also invite you to register for one of our free Special Needs Trust Workshops. For more information, follow this link: Free Workshops and Seminars.
- 2024 Federal Estate and Gift Tax Update (VIDEO) - November 16, 2023
- National Long-Term Care Awareness Month (VIDEO) - November 13, 2023
- Proposition 19 and Repeal the Death Tax Act (VIDEO) - November 3, 2023