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There nothing stopping you from doing this, but in many cases, it could cause more problems than it solves. Obviously, health care insurance is very important for people with special needs.Most Americans get their coverage through their employers, and a high percentage of people with disabilities cannot work. The solution for many is Medi-Cal, which is a need-based government health insurance program which has been implemented in California as Medi-Cal.Supplemental Security Income is self-explanatory; this benefit provides a source of cash for people that do not have any personal earning power.A significant improvement in financial status can cause a loss of eligibility. This is why you have to take certain steps if you want to safely leave an inheritance to someone that is relying on these benefits.
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As a response to the eligibility situation, you could establish a Third-Party Supplemental/Special Needs Trust for the benefit of a loved one with a disability or who is eligible for needs-based government benefits.
You would name a Trustee to act as the administrator or manager of the Trust. This can be someone that you know personally, or you may use a professional trustee such as a private fiduciary or the trust department at a financial institution.
The beneficiary would never be able to directly touch the funds, and the Supplemental/Special Needs Trust would be irrevocable. Under the rules of these programs, the Trustee would be allowed to use assets in the Supplemental/Special Needs Trust to satisfy the supplemental needs of the beneficiary.
This term is used to describe needs that are not covered by the government benefits. There are wide range of different expenditures that would be improved, including a place of residence, household items, electronic equipment, school tuition, and countless other goods and services.
As long as everything is done in correctly, the beneficiary will remain eligible for the government benefits.
Sometimes a disabled person will come into money through a personal injury settlement or judgment. Can someone in this position use the money to establish a supplemental needs trust?
Many people are surprised to hear that the answer is yes, this is possible, they may create a First-Party Supplemental/Special Needs Trust. Of course, the individual in question would surrender direct control of the funds, but a Trustee would be able to make the same types of purchases.
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Under Medicaid/Medi-Cal regulations, the program is required to seek reimbursement from the estates of people who used their services. Since you cannot qualify for Medicaid/Medi-Cal if you have significant assets in your name, the cupboard is usually bare so to speak. The situation is different with a Supplemental/Special Needs Trust.
If you fund this type of trust for the benefit of someone else, it would be a Third-Party Supplemental/Special Needs Trust. When you establish a Third-Party Supplemental/Special Needs Trust, you would name a contingent or death lapse beneficiary. That death lapse beneficiary would inherit what is left after the primary beneficiary passes. Medicaid/Medi-Cal cannot recover against the assets in the Third-Party Supplemental/Special Needs Trust.
When a person that will be the beneficiary is funding the trust, it is a First-Party Supplemental/Special Needs Trust. Medicaid/Medi-Cal will be able to recover against assets that remain in such a Trust upon the beneficiary’s death.
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We Are Here to Help!
If you would like to discuss special needs planning or any other estate planning situation with a licensed attorney, please let us know.
We know that it can be a bit disconcerting to discuss these personal matters with someone that you have just met. Our attorneys and team members take this to heart, and you can rest assured that we will put you at ease from the start.
To schedule a consultation appointment, give us a call at (408) 356-9200. If you would prefer to send us a message, simply fill out the contact form on this website.
